Seasonality charts have something wonderful to them. Just like simple rules like “Sell in May” they seem to be tapping into the underlying market dynamics and provide certainty in an uncertain world. If you look at the average seasonal pattern of the US, UK and European stock markets from 2010 to 2019, seasonality indeed seems to have something going for it.
Note that I excluded the pandemic years 2020 and 2021 from the seasonality chart above because Covid and the subsequent lockdowns clearly messed with regular seasonal patterns that investors try to chase. But over the last decade, seasonality seems to have worked broadly similarly across regions. There was a rally at the start of the year that lasts until May with a short period of weakness in early February. Then comes the summer lull that is interrupted by a short rally in July and August, but overall, markets are moving sideways to down before accelerating again in October to December. Simple, isn’t it? Yes, it’s simple – and absolute nonsense.