Dan Hassey: The calendar has a huge influence on many asset prices.
Profit opportunities present themselves all year ’round, and it’s easy to take advantage of them. It’s called “seasonality,” and every active investor should pay attention to it.
For example, with earnings season in full swing, you can see trading activity picking up in the markets.
But even when the latest rounds of reports start to taper off, there will be plenty of “trad-able” events to take their place.
Here are some common seasonal patterns.
- Housing activity tends to pick up in spring and decline in the winter.
- Retailers do most of their business in the “back to school” and holiday shopping seasons.
- Stocks tend to perform best between November and May. Once November arrives, investors start anticipating the next year and taking new positions. Then by May, asset prices reflect the rest of the year’s business activity.
- Stocks generally rally before each quarterly earnings season, and consolidate after earnings season — if earnings meet expectations.
- Hurricane and summer-vacation seasons have long-standing market influence.
Today let’s take a look at two ways extreme weather conditions can work in your favor, no matter where you live.
The chart below shows seasonality for an index of natural gas stocks, the First Trust ISE-Revere Natural Gas Index (NYSEARCA:FCG):
The seasonality chart is from our good friends at Phil Erlanger Research Co. The bottom seasonality chart is based on six years of price trends.
The most important part of the chart is the price trendline in pink. It shows the average price action for 7 years.
We see that an upward trend usually starts in late January and peaks in late June. This year (upper part of the graph) is following the usual pattern so far.
The production and reserves of the companies in this ETF are mostly natural gas, so their results are related to natural gas prices.