Buckle your seatbelts - low earnings season is coming, everywhere

May's saying "sell stocks and go on vacation" is one of the most famous clichés in finance. This seasonality in results is strong and supported by data, and is even greater worldwide than in the US. None of the 15 analyzed indices performed better in the next six months than in the previous one. This is due to the calendar of company guidelines for the first quarter and the repositioning of investors for the fourth quarter. Fundamentals remain more important – the peak of the interest rate cycle is imminent and economic growth remains resilient. However, the positive market outlook is clearly losing technical support for the next few months. We focus on the "new defense" - big tech and traditional defenses like healthcare that can survive slowing economic growth and rising stock volatility, but can also benefit from lower inflation and bond yield prospects.

Global situation

We analyzed monthly price returns for 15 of the world's largest stock indices, going back over 50 years on average. The average monthly rate of return on prices from November to April is 1,2 percent, excluding negative months. For comparison, in the period from May to October, the return was only 0,1 percent, and during this time there were three months of losses. This seasonality difference is seen across all 15 markets, with none of them experiencing stronger returns during the summer months. The greatest propensity to price seasonality is in higher beta assets and markets such as the UK 250 FTSE (small cap) and Italian FTSE MIB, while typical American seasonality is below the global average for S & P 500, NASDAQ and Wilshire small caps.

Seasonality

This resilient factor of seasonality has three aspects. Firstly, the company's forecasts for the whole year are usually positive in QXNUMX, secondly, in QXNUMX investors usually reposition for next year, before the known January price effect, thirdly, the summer months suffer from the lack of these positive factors, along with the typical lower investment volume. This seasonality is evident even in Southern Hemisphere stock markets such as Australia. This probably reflects the growing importance of international investors and the growing correlation in global equity markets.

About the author

Ben Laidler - global markets strategist in eToro. Capital investment manager with 25 years of experience in the financial industry, incl. at JP Morgan, UBS and Rothschild, including over 10 years as the # 1 investment strategist in the Institutional Investor Survey. Ben was the CEO of the independent research firm Tower Hudson in London and previously Global Equity Strategist, Global Head of Sector Research and Head of Americas Research at HSBC in New York. He is a graduate of LSE and Cambridge University, and a member of the Institute of Investment Management & Research (AIIMR).