ASX Monthly Seasonality
In the ASX Today section of the site I include a table showing the performance of the ASX All Ordinaries Index (ASX:XJO) for each month, since the turn of the century.
source:Â https://stocksunderthehood.com/free-resources/xjo-seasonality/
When we average out the performance of each month we can see that some months seem to be better than others. Is this just a coincidence or is there something happening in the market at those times to explain it?
When you look at the averages since 2009, the discrepancy in monthly performance looks even more distinct.
Some popular explanations
- 3 of the Big Banks go ex-dividend in NOVEMBER and MAY.
- Those 3 Big Banks pay their dividends in DECEMBER and JULY. The theory is that most of this money is reinvested in the market.
- Reporting season runs through February and August.
- June often sees portfolios being adjusted for EOFY resulting in some tax-loss selling.
- Companies in the US are forced to cease buy-backs in October which can lead to steeper than usual falls in their markets.
Final thoughts: Market seasonality: Myth or fact?
Seasonality is something I’ve heard mentioned more and more over the years. Even if you may feel that they underlying explanations are a bit weak, the more people look and talk about this the more likely it becomes a self-fulfilling prophecy. For me, it’s not something I dwell on for too long but I do like to know where I am in the cycle. If it’s June and I’m seeing weakness I will consider if that weakness is possibly due to some tax-loss selling. If so, I will take confidence in the fact that the market tends to bounce back strongly in July etc.
Disclaimer: This information is provided purely for educational purposes. It takes no account of an individual’s personal financial circumstances and hence can in no way constitute financial advice. The above data may be subject to errors or inconsistencies for which the author takes no liability. It is imperative that all investors do their own research or if they need advice, seek it from a qualified financial adviser.
Market seasonality: Myth or fact?