The new year will soon be upon us, and with it comes the continuation of a long tradition. The Stock Trader’s Almanac is now in its 49th edition. Well, not quite the track record of The Old Farmer’s Almanac, which launched in 1792, but presumably a tad more data driven.
The spiral bound, green lexotone-covered almanac opens flat for easy access to its information or for jotting down notes. The format remains essentially the same as that of recent editions, with a calendar section, a directory of trading patterns and databank, and a strategy planning and record keeping section. The calendar section has on facing pages historical data on market performance (verso) and a week’s worth of calendar entries (recto). January’s verso pages, for example, give the month’s vital statistics, January’s first five days as an early warning system, the January barometer (which has had only eight significant errors in 65 years, one of those in 2014), and the January barometer in graphic form since 1950. Each trading day’s entry on the recto pages includes the probability, based on a 21-year lookback period, that the Dow, S&P, and Nasdaq will rise. Particularly favorable days (based on the performance of the S&P) are flagged with a bull icon; particularly unfavorable trading days get a bear icon. A witch icon appears on options expiration days. At the bottom of each entry is an apt quotation. There’s about a five-square-inch space in which to write.
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
The Stock Trader’s Almanac pays particular attention to the presidential cycle, and its message is mixed for 2016. On the one hand, “election years are the second-best year of the four-year cycle and sixth years of decades have been up double digits four in a row, so 2016 has some solid history behind it.” On the other hand, “eighth year of presidential terms represent the worst of election years since 1920. In eighth years, DJIA and S&P 500 have suffered average declines of -13.9% and -10.9% respectively.” Admittedly, there are only six data points in this eighth year series (new to this edition), but of them only 1988 was positive.
What other seasonals are powerful? The best six months is still “an eye-popping strategy.” Since 1950 the best months are November, December, January, March, and April. Add February, “and an excellent strategy is born!” These six consecutive months gained 17,883 Dow points in 65 years, while the remaining May-through-October months lost 1066 points. In the last two years this pattern has been less “eye popping.” The DJIA gained 4.8% in 2013 and 4.9% in 2014 between May 1 and October 31 and 6.7% and 2.6% between November 1 and April 30.
As always, this year’s almanac is chock full of data that will delight traders who believe that past is prologue.