It took longer than usual, but spring finally arrived this week for a majority of the United States.
For people located in the snow belts of the country, spring is the time to get out of the house or apartment, work on lawns and gardens, enjoy outdoor activities, and fight off the doldrums of winter weather. Living an active lifestyle is a prescription for happiness, according to most doctors and psychologists, and no one is going to argue against the value of moving around and breathing relatively fresh air.
During wintry weather months, some people turn their attention to indoor pursuits to take their minds off of the fact they can’t or don’t want to go outside. One of those pursuits is pursuing investment opportunities. Nothing takes your mind off of snow and cold like making a few bucks.
When the weather turns warm and bodies go outdoors, there is less time spent worrying about investments. This is a fact backed by research, and it is one advisors need to consider when the stock market takes a turn one way or another at a time when investors might not be looking.
Investors may need to be activated to move when the weather takes their mind off of the business of investing.
It is well-documented that weather plays a role in the stock market and the American economy, especially when that weather is bad. Hurricanes affect oil fields in the Gulf and on the coasts. Tornados affect homes and farms in the middle of the country, and throw the insurance industry for a loop, even though that industry exists because of those kinds of weather disasters.
But irascible weather is one issue. The seasons are another. There is apparently scientific proof that the stock market is affected by the seasons, as cold weather turns warm.
Forbes recently reported on a study conducted by researchers at Massey University in New Zealand that showed global stock markets perform better from November through April than through the summer months, as much as 4.5 times better. That’s the historical figure; over the past 50 years, the stock market growth was 6.2 percent greater in the cold months than in the warm months. And that research was based on stock market performances for investors in 35 countries.
There is no corporate explanation for the change in stock market growth from one season to the next. It is not like senior executives take an entire summer off or that managers stop caring about production, development and innovation of products and services.
This spring and summer, the President of the United States still plans to meet with North Korean officials for a blockbuster negotiation over nuclear weapons production. He is still battling China over trade, and still discussing the value of NAFTA and the Iran nuclear deal, all while the rest of the country gets their bicycles out of the garage and clean their golf clubs. The world does not stop turning when the weather turns warm.
The change is, perhaps, in the minds of the investors who are the engine that drives the stock market. They may just have other activities on their mind, like summer vacations or golf games or lake or ocean excursions.
Spring and summer is a time of transition for many Americans. Students (of investor parents) graduate, families move more often, city dwellers may transition from one apartment to another. All of these are perfectly normal summer activities that take the minds of investors off of their portfolio performance, at least for a while.
Advisors need to be aware of the seasonal changes in investor focus and act accordingly. When corporate events occur that can impact investment options, advisors need to be the ones who make the first contact to those investors who could be affected. They may end up reaching a client who is relaxing at the 19th hole, but that investor will likely be thankful that someone is keeping an eye on the events of the day and the investment opportunities that result from them.
© 2018 Spectrem Group