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Why the Question of Seasonal Patterns Is Paramount on the Cusp of October 2012


This could be the year we finally get over Lehman Brothers. What these patterns mean for 2013 is anybody's guess.


Editor's note: Minyanville welcomes veteran journalist and commentator Bob O'Brien as a regular and exclusive contributor.

MINYANVILLE ORIGINAL "Sell in May and go away" has become so well-known – even beyond the institutional community – that it's now axiomatic. Kind of how Black Friday gravitated from being a catchphrase used only by retailing insiders to a staple of day-before-Thanksgiving newspaper circulars.

Nobody's come up with a similar sobriquet for October. (Sorry, '70s-era radio station DJs – Rocktober... it don't count.) "Buy in October and" – what? … have a happy Halloween …? It lacks the requisite poetic resonance. But, goshdarnit, it has worked.

By now, the market's traditional seasonal patterns have become so widely understood that it's become a classic chicken-and-egg question: Does the market behave this way because of fundamentals? Or does the expectation of a seasonal pattern, in and of itself, drive investment behavior (see: fund flows, sentiment readings, and – darn – I waited nine months to get around to my New Year's resolution to pay attention to my investments)?

Everything about this, of course, is made more manifest in election years.

The question of seasonal patterns becomes paramount here on the cusp of October '12, because of the market's performance. (The "Thank you, Ben" storyline became as ubiquitous as it is true.) You might have heard that stocks are as richly valued as they've been in five years. So the question becomes: Does that obviate the expectation of the traditional fourth-quarter rally? Did we squander the Christmas Club savings on a summer cruise?

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