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Market seasonality is mattering less and less

Historical tendencies look to be losing sway in financial markets

There is little debate that seasonality affects business activities in everything from construction to retail pricing. Investors also tend to view financial market risk and volatility as vulnerable to seasonal trends, with studies backing up this view in specific markets over certain amounts of time.

But some caution should be taken when attemping to project traditional concepts of seasonality onto today’s market, warns Warren Lovely, head of public sector research and strategy at National Bank Financial, who noted that seasonal trends aren’t as deep-rooted as many think.

“Indeed, statistical analysis demonstrate that, since the global economy began to recover, there’s little compelling proof of identifiable seasonality in rates, credit, currencies, commodities, equities or perhaps volatility,” Lovely said in a report. “It’s not too markets behave uniformly all year round, but rather that seasonal patterns are oftentimes and increasingly irregular.”

In relation to economic performance, disappointments in the U.S. have clearly been grouped early in the year and summer months. But Canada’s economic swings haven’t been as reliable, with Lovely suggesting it\’ll remain out of synch with the U.S.

The strategist’s recommended positioning often runs against old-school perceptions of market seasonality. For instance, he’s underweight fixed income and overweight equities throughout a period many think about a dangerous one for stocks.

“Simply put, historical tendencies turn to be losing sway, with waves of risk aversion and financial market volatility less likely to be slaves to the Gregorian calendar,” Lovely said. “It\’s all regulated enough to determine those preaching seasonality lose faith.”