Seasonality is one characteristic of the equity market that we regularly incorporate into our market analysis. One example of this approach is our Stock Seasonality Trends report, which goes out weekly to Bespoke Premium and Institutional subscribers and provides an overview of the historical performance of the S&P 500, its ten sectors, and stocks within each sector over the upcoming two-week period. With the month of March just kicking off, this afternoon we wanted to highlight the S&P 500’s historical performance during the month of March over the last ten years, including which sectors have historically outperformed the index and which have underperformed.
As shown in the chart below, the S&P 500’s median gain in the month of March over the last ten years is +1.05%. The top performing sector during this period has been Telecom Services with a median gain of 4.27%. Remember that the Telecom Services sector only has a handful of stocks in it, so even if it gains that much, the overall impact on the market will be small. After Telecom Services, the only two other sectors that have seen a median gain of more than 2% are Consumer Staples (2.42%) and Energy (2.06%). On the downside, the only two sectors that have underperformed the S&P 500 in March are Consumer Discretionary (-0.14%) and Health Care (+0.95%), and given their large weights within the index, they drag down the overall performance of the index.
In each week’s Stock Seasonality Trends report, we also include a table similar to the one below which shows the sector’s performance, consistency of positive returns, as well as its performance in each individual year. While the median returns are definitely useful, it is also important to know how consistent each sector has been to the plus side. In this case, even though it only ranks as the fourth best performing sector with a gain of 1.92%, Industrials have been up in the month of March every year since 2005. That compares to 70% for the S&P 500 and 90% for Telecom Services. Meanwhile, Health Care has only been up in the month of March barely more than half of the time, and Consumer Discretionary has been down as often at is has been up. As mentioned at the top, seasonality is just one factor that we incorporate into our overall market outlook, so we would never advise investing based solely on this one factor, but often times these trends do have a way of repeating themselves, so they should never be completely dismissed either.