During the 1980’s and 1990’s, investing was all about buy & hold. Yes, “flavor of the day” disasters such as Bre-X or any number of dot-com stories did tarnish some investors portfolios. But during most of that 2-decade stretch, you could profitably buy a collection of blue-chips and hold them for years & years. The rise of the “Financial Planner” selling high cost (often DSC) mutual funds to relatively ignorant investors was born on the back of that market. No matter how unsophisticated you or your Advisor were, most everyone made money. Ah, the good old days…
Things changed in the 2000’s. Enter the age of discipline. I was fortunate. As a retail Investment Advisor I had a couple of things going for me during the 1990’s. First, I came from an athletic background. I’ve trained and competed in cycling and other sports for 35 years – and continue to do so. Demanding sports involve a structured training regime. Adherence to painful interval and speed-tempo workouts are a weekly cycling routine for competative cyclists. 30 years of this type of training has helped me develop a mindset of “follow the program, results will follow”. I also began studying technical analysis in 1994. The disciplined approach to trading appealed to me as an athlete. As with cycling, I continue to “train” in technical analysis by both following my discipline as best I can, and continuously upgrading my knowledge through reading and studying my field.
Seasonality is a discipline that I first discovered back in the late 1990’s after reading Yale Hirsch’s “Stock Traders Almanac”. From there, I read Brooke Thackray’s original book, “Time in. Time out”- and read his Investors Guides religiously every year. I’m privileged to say that I count Brooke in as one of my friends. I continue to learn about this fascinating discipline from both Brooke and one of the Grand Masters of technical analysis, Don Vialoux, author of www.dvtechtalk.com.
On the subject of disciplined seasonal investing, there is a tendency for markets to hit a mid-summer high point in mid July. This year, the “Sell in May” seasonal pattern was amplified by hawkish U.S. Federal Reserve’s statements – offset by the usual Q2 earnings bluster to drive the markets up in early July. It would appear that seasonal patterns are working quite well this year. For that reason, and for the reason of maintaining a disciplined approach to a trading plan, I continue to hold cash in my equity portfolio. In fact, I anticipate raising my cash component from 40% to 50% shortly. It is my opinion, as expressed in my July 4th blog (http://www.valuetrend.ca/?p=2310) , that markets will offer less opportunity during the latter part of the summer.
I’ve posted a chart provided by www.sentimentrader.com showing the daily average performance of the S&P500 during July. As you will note, the 13th trading day would be July 18th on the calendar. This coincides with Brooke Thackray’s work.
Stay safe, and trade with discipline!