Stock Trader's Almanac 2018
By Jeffrey A. Hirsch and Yale Hirsch
Quick Summary
The fifty-first edition of the classic annual reference for seasonal and cyclical stock market patterns, providing calendar-based data on presidential election cycles, the January Barometer, best months to buy and sell, day-of-week tendencies, and dozens of other recurring market patterns backed by decades of historical data.
Executive Summary
The Stock Trader's Almanac, founded by Yale Hirsch in 1968 and continued by his son Jeffrey, is the definitive reference for seasonal and cyclical stock market patterns. The 2018 edition (the 51st) presents its wealth of market data in a unique calendar format, with each month featuring historical data, seasonal tendencies, and relevant market statistics. The Almanac's fundamental premise, challenging J.P. Morgan's quip that "stocks will fluctuate," is that stocks fluctuate in well-defined, often predictable patterns that recur too frequently to be coincidence.
Core Content
The Presidential Election Cycle
The four-year presidential cycle is one of the Almanac's cornerstone patterns: pre-election and election years tend to produce the best stock market returns, while post-election and midterm years tend to be weaker.
The January Barometer
"As January goes, so goes the year" -- the Almanac's most famous indicator, with an 86.6% accuracy ratio since 1950 (with only nine major errors).
"Sell in May and Go Away"
Since 1950, virtually all net stock market gains have occurred during the November-April period, with the May-October period producing near-zero or negative returns on average.
Day-of-Week, Week-of-Month, and Month-of-Year Patterns
Detailed statistical analysis of market bias at various time scales, including the tendency for the market to be stronger around month-end and weaker mid-month.
Annual Market Data
Comprehensive historical tables on DJIA, S&P 500, NASDAQ, and Russell 2000 performance, including monthly returns, annual highs and lows, and volume data.
Critical Assessment
Strengths
- Five decades of consistent data collection and analysis
- Calendar format makes seasonal information immediately actionable
- The January Barometer and presidential cycle have remarkably strong track records
- Unique combination of data reference and practical trading tool
Limitations
- Seasonal patterns may weaken as they become more widely known and traded
- Annual edition format means some data is time-sensitive
- Statistical significance of some patterns has been questioned by academics
- Does not account for the impact of algorithmic trading on seasonal patterns
Conclusion
The Stock Trader's Almanac remains an indispensable reference for traders and investors who incorporate seasonal and cyclical analysis into their decision-making. While no pattern works every time, the Almanac's long track record of identifying recurring market tendencies provides a valuable layer of analysis that complements fundamental and technical approaches.
