Some investors keep a close eye on the calendar, attempting to profit from the so-called “calendar anomalies”. These are patterns found in historical stock market returns that are dependent on the day of the week, month of the year, the season, etc., but are considered anomalies because there is no logical reason why any particular date on the calendar should be a better time to be invested in stocks than any other.

For example, stock markets throughout the world have generally performed much better in the period of November – April than they have from May – October. Various theories have been presented as to why this has happened, but none are very satisfying. If you can’t identify the reason why something is occurring, how much faith do you have that it will continue?

The “day of the week effect” is another popular anomaly, seeking to identify the highest returning days to have your money in stocks. But some funny things have happened along the way to this indicator. According to Stock Trader’s Almanac, Monday was the worst day of the week for stocks from 1953 to 1989. An unexplained reversal occurred in 1990, though, and since then Monday has been the best day of the week for stocks. So are these just results of randomness? After all, one of the days of the week had to be the best, while another had to be the worst. But even if there was some unknown fundamental reason why this relationship occurred, it clearly is not permanent.

Just around the corner we need to watch out for the January effect, which has historically shown that stocks, particularly those of small companies, have above-average returns in January. This one is a little more interesting because there are at least some plausible explanations. One idea is that investors sell poor performing stocks late in the year to take advantage of tax losses, depressing share prices in December. When January comes around, the selling pressure ends and stock prices may rise. Nice theory, but it is inconclusive, not the least of which is because December has historically been one of the better months of the year. No matter the basis behind the January effect, something interesting has happened over time. William T. Ziemba from the University of British Columbia (UBC) - Sauder School of Business has researched the January effect over many years. His most recent conclusion: the January effect still exists, except for the fact that it now occurs completely in December!

We do not attempt to take advantage of these or any other timing effects. As the examples above show, they can’t be counted on to persist after you’ve discovered them. And without a good causal explanation, it’s difficult to determine whether there even IS a real effect or whether the seemingly strong pattern was just a result of randomness. Instead, we will stick with our strategy of investing with a long-term focus that emphasizes relationships between how assets respond to the economic environment and leave the calendar watching to those who think excess returns can come so easily. We wish them the best of luck…and they’re probably going to need it.

Investing in stocks is subject to risk including possible loss of principal.  No strategy can assure success or guarantee against loss. Past performance is no guarantee of future results.