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s&P 500 Sector Seasonality

Seasonality analysis can be another helpful tool for investors and for traders to provide optimal time frames to enter and exit various S&P 500 sectors during the year. Although seasonality analysis is not a precise science, understanding the time periods when a sector is especially strong or especially weak may give an investor or a trader greater confidence in pursuing or avoiding the sector in question. In conjunction with other analysis such as relative strength, price momentum, pattern recognition and others it may enhance an investment performance by exploiting the seasonal anomalies that are inherent in many sectors.


Our studies reviewed the performances of the 11 S&P 500 Sectors in relationship to the S&P 500 Index (SPX) on a month-by-month basis over the course of the last 20-years. We recorded the % of months in which the S&P 500 sector closed higher than it opened and the average returns during the month in question. There are some interesting conclusions that can be drawn from this seasonality study.


1. SPX tends to be strong heading into the last 3-months of the year as evidenced by the superior returns during Oct (+1.2%), Nov (1.2%), and Dec (0.4). These three consecutive months along with the Mar (1.6%), Apr (1.7%) and Jul (0.8%) produced almost all the SPX returns each year.


2. When there is a strong rally into the last 3-months of the year, there is as tendency for SPX to consolidate its gains during the first two months of the year – Jan (-0.3%) and Feb (-0.3%).


3. After a brief market correction, SPX would resume its uptrend with very strong rallies during Mar and Apr timeframe before again consolidating into the summer months.


4. With less than 2-months before the end of the year, it appears there are 5 S&P 500 sectors that have historically outperformed SPX during Nov and Dec: S&P 500 Industrials (XLI) – Nov/Dec (+1.8%/+0.6%), Materials (XLB) – Nov/Dec (+1.9%/+1.1%), Consumer Discretionary (XLY) – Nov/Dec (+0.9%/+0.5%), Communication Services (XLC) – Nov/Dec (-0.3%/+1.4%), and Real Estate (XLRE) – Nov/Dec (-1.2%/+3.0%).


5. Surprisingly, Info Technology (XLK) tends to be weak into the last two months of the year underperforming SPX and its peers during Nov/Dec (+0.1%/-1.4%).


For further information please review the attached charts of showing the seasonality tendencies of the 11 major S&P 500 sectors over the last 20-years.


Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com


Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

Source: Courtesy of StockCharts.com

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