In order to gauge whether the patterns of the last fifty years are as strong today as they were several years ago, we calculated the average forward three-month return of the S&P 500 on each day of the year from 1950 through 2005, and then again using only the years from 2001 through 2005.
As the chart highlights, there appears to be some evidence that traditional patterns are moving up on the calendar. For example, the summer doldrums usually ended on July 30th when the average three-month forward return briefly dipped into negative territory. Over the last five years however, the worst three month period for the market has moved up the calendar and now begins on June 29th.
Similarly, the best three month period for the market used to begin on October 28th. Over the last five years however, the best three month period for the market has started coming a little earlier (October 9th).
Applying these trends to today, we find that longer-term, the market’s return over the next three-months averages about 2%. Over the last five years however, as more investors have anticipated and positioned themselves for the Santa Claus and New Year’s rallies, the market has become less generous, as average returns are now flat.
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