Whether you’re a seasoned investor or just starting your journey, following the stock market can often feel like riding a roller coaster. Sometimes, you can see the turns well in advance and map out your next move. And other times, a sudden drop can surprise you. The ride itself can be bumpy and often leaves you feeling a bit disoriented, and unsure of your next move. But don’t worry: The stock market does have some seasonality to it. And while you can’t predict what the market will do, you can expect there to be changes based on the season.
Today, we’re diving into the seasonal trends of impact investing and seasonality to help you stay the course for your long-term investing gains.
What Is the Impact of Seasonal Trends on Investing?
Seasonal trends can have a big impact on the state of the stock market. Oftentimes, the market sees gains from November through April. But May through October are often a little less action-packed. When you’re choosing which stocks to invest in, keeping the seasonality of that business in mind is key.
For example, if you’re investing in retail, technology, or consumer goods businesses, you may find that their biggest gains in the market are generally during the holiday season. Knowing this about your specific investments will help you stay the course when these businesses are in their “off seasons”.
Three Factors that Affect Market Seasonality
Market seasonality may seem like it ebbs and flows spontaneously, but the stock market does have somewhat of a pattern based on a few factors. When you base your investing decisions with these factors in mind, you’ll be able to face the uncertainty of the market with a bit more understanding of some of the factors affecting the market.
Here are three major factors that affect market seasonality:
1. Holidays
The holidays are not only a time of festive cheer but also a significant driver of economic activity and consumer spending. Retailers, technology companies, and consumer goods manufacturers often experience high demand during this time, opening up even more investment opportunities.
2. Presidential Elections
If you’re wondering how the stock market (and your portfolio) will be affected during the upcoming election season, you’re not alone. Election seasons often keep investors on their toes, wondering if they need to redistribute their portfolios, buy or sell stocks, or stay the course. In the history of the stock market (from 1928-2020), there have only been four elections that produced negative returns in the market.1
3. Tax Deadlines
Tax season also plays a role in investing and can be used as a predictable measure of stock market fluctuations. You may find that retirement accounts, tax-deferred savings plans, and tax-efficient investment strategies become a major star of the show during tax season.
As an investor, it’s always exciting to see your returns grow during some of these seasonal shifts. Knowing these predictable patterns will help you stay the course when your stocks may be in a seasonal downturn. Don’t let fear or shifts in the market cause you to panic. Investing is often about playing the long game.
Working with a financial advisor during any of these seasonal shifts will help you gain confidence as you work through the bumps and uncertainty of the market along the way. Your SageSpring Wealth Partner is here to help you discover the trends in impact investing and help you continue to reach your financial goals.
Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
