Today is Halloween, and so far it’s been a very spooky year for investors. Inflation, rate hikes, geopolitical conflict and recession fears have all been stirred up in a witches’ brew of volatility to drive equity and bond returns lower. But could the remainder of 2022 finally hold more “treat” than “trick” for stocks? Market seasonality suggests it just might.
Seasonality is simply the study of how the market performs throughout the year, on average. Most investors are familiar with the maxim of “sell in May & go away” which is reflective of market returns historically being lower in the summer and early fall, and stronger during the winter and spring months.
The chart below from Renaissance Macro is a variation of these seasonal studies. It shows the average forward 3-month return over the course of the year using the full history of the S&P 500 going back to 1928. In other words, every point along the line represents how the market performed over the following three months. Last week, we just happened to reach the high point for the year which shows that from October 25th, the S&P 500 has gained 3.2% on average over the next three months. This is well above the overall average return of 1.9% shown by the horizontal dashed line.
Of course, there are many other variables that will influence how the market performs over the remainder of the year. But in a year full of fright, seasonal tailwinds might help make things less scary.

Carl Noble, CFA®
Senior Vice President of Investments
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