Why Now May Be a Good Time to Own Stocks

The period from March through May has historically been a bullish time to own stocks

by Alex Eppstein

Published on Feb 29, 2016 at 10:58 AM

Seasonality is something traders must be aware of, so we at Schaeffer's try to cover seasonal stock market trends as best we can. With that in mind, we're coming up to an interesting time of year, with March just around the corner. It turns out that spring is a pretty good time to own stocks.

Schaeffer's Senior Quantitative Analyst Rocky White put together the two charts below. They show the performance of the S&P 500 Index (SPX) and Dow, broken down by three-month time frames, going back 50 years:

160229springseasonality

As you can see, the March-through-May returns on the SPX are better than all but two of the three-month periods, averaging a gain of 2.9%. The percent positive is quite strong at 68%, as well. What's also encouraging is that volatility levels are relatively muted, based on the standard deviation of 6.6% -- the second-lowest reading.

It's a similar story for blue-chip stocks, based on the Dow returns. During the last 50 years, the index has gained nearly 3.1%, on average, from March through May -- better than eight of the 12 time frames. Percent positive is again a rock-solid 68%, and the standard deviation is comparatively low at 6.2%.

In short, history suggests now is a good time to own SPX and Dow stocks. This is especially true if you're a contrarian trader, as options market data suggests pessimism has climaxed and is starting to unwind.
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