Alpha Power Investing NewsletterFebruary 1, 2019
Seasonality in the International Stock Market
A Worldwide Phenomenon
International Index Focus: MSCI EAFE Index
All results presented below are based on index data returns and do not represent actual trading. The data used is monthly total return data culled from the PEP database from Callan Associates.
Long-Term Buy-and-Hold History
As you can see in Figure 1, there was significant growth of capital over time. However, there was also a tremendous amount of volatility along the way, including four separate drawdowns in excess of -30%.
International Power Zone vs. International Dead Zone
Figure 2 displays the growth of $1,000 invested in the MSCI EAFE Index ONLY during the months of November through April, beginning November 1, 1972 through April 30, 2018.
Figure 3 displays the growth of $1,000 invested in the MSCI EAFE Index ONLY during the months of May through October of each year, beginning May 1, 1972 through October 31, 2018.
In Figure 2, note the relatively smooth and consistent growth of capital during the Power Zone months compared to the much more volatile and highly inconsistent returns during the Dead Zone months presented in Figure 3.
Results: Power Zone vs. Dead Zone
Key Things to Note
The Optimism Cycle: Why Seasonality Works
Historical stock market price action clearly seems to bear this theory out, not only in the U.S. but in countries around the globe. The Optimism Cycle has demonstrated itself to be one of the most consistent, persistent and pervasive market trends available to investors.
Disclosures and Disclaimers: Past performance is not a guarantee of future performance. The returns illustrated in the charts above do not represent actual trading and is not representative of any Alpha Investment Management strategy. The data does not include management fees or the cost of funds, trading, or other expenses. The illustrations are designed to quantify the effect of certain time periods (as specified) on the MSCI EAFE Index. Indexes are not investment vehicles and persons cannot invest directly in an index. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. Developed Markets countries in the MSCI EAFE Index include: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.
The data used to construct the illustrations was obtained from third-party sources. While Alpha believes the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.
Alpha Investment Management, Inc. is a SEC registered investment advisor. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
© 2019 Alpha Investment Management, Inc.