The U.S. stock market at the time of writing, (August 16, 2007), has spent a large part of the summer so far in a seemingly unstoppable swoon that has spooked all but the hardiest of investors and traders. Many may wish that some kind of simple guidelines were in existence that could provide pointers as to which time of the year may be the most suited for bullish bets in the market and which constitutes the best time to take money off the table. How much easier it would be to make money in the market if buy and sell decisions could be made simply by referring to the calendar!
Techniques designed to time markets in order to maximize profits come in many shapes and forms and naturally there are many opinions as to when might be the most propitious times during the year to buy and sell stocks. Statistically, September is the month that shows the biggest tendency for stock market declines. October scares some people because some major market crashes have occurred in that month including those of 1929 and 1987. We hear about "summer rallies" but find that concept is contradicted by the old adage "Sell in May and go away." There is a Santa Claus rally, closely followed by a January Effect. But in our view Mark Twain probably summed up the best way to view the timing of stock purchases by month of the year when he wrote: "October. This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, March, June, December, August and February."
This article was written jointly by Aidan J. McNamara and Martha A. Brozyna
Aidan McNamara is associate publisher at The Deal LLC in New York, publisher of the weekly financial magazine The Deal as well as The Daily Deal and TheDeal.com. He holds an MA (with distinction) in Area Studies (Eastern Europe and Russia) from the University of London, 1981 and a BA in German from the University of Manchester.
Martha A. Brozyna received a Ph.D. in history from the University of Southern California in 2005 and a BA in history and political science from Rutgers University where she graduated Phi Beta Kappa in 1995.
McNamara and Brozyna are the authors of Contrarian Ripple Trading: A Low-Risk Strategy to Profiting from Short-Term Stock Trades, scheduled for publication by John Wiley & Sons in October 2007. Martha Brozyna published Gender and Sexuality in the Middle Ages: A Medieval Source Documents Reader in 2005 (McFarland & Co.)
The authors have additional information on themselves and their forthcoming book at their website http://www.ridetheripples.com