Overtime

Q4 seasonality

Good morning,

This week I’m telling you everything you need to know about seasonality for the rest of the year.

While price comes first in my work, you would be hard-pressed to find any process that would have worked better than simple seasonality over the past 2 years, especially if focusing on the Presidential cycle. More recently, September lived up to its reputation for volatility, and got worse late in the month, as it usually does.

So this week we’ll compile everything you need to know about Q4 seasonality including:

• The Presidential cycle

• Seasonality for individual months

• Why momentum typically continues through year-end

• and more!

---

Seasonality has worked remarkably well

2023 continues to follow the seasonal script

The above chart was a central tenet in our “Here’s What the Textbook Says Should Happen” addition of the Monday Morning Playbook back on July 3. That textbook playbook called for a rally through mid to late July, but then markets to potentially hit the skids. Even markets with strong momentum (+10% YTD through the first half) had been susceptible to this weakness in pre-election years. As you can see, the recent pullback was right on schedule.

Even down to the back half of September

I shared the above chart two weeks ago, noting that even though we were already down in September, history suggested the weakness wasn’t over. Sure enough, we made it 13 of the last 14 times that the first half of September has been negative, the second half has also been lower.

The key may be the Presidential Cycle