US stocks rise on winter solstice. More good days ahead?(Read article summary)
Stocks tend to rise after winter solstice and on into January.
On the shortest day of the year, stock markets made healthy gains, with two of the three major indexes rising more than 1 percent and the Nasdaq reaching a 15-month high of 2237 points.
Are more good days in store?
A few more, according to studies that measure the effects of solstices and equinoxes – or seasons, more generally – on markets. Researchers find that around the time of the fall equinox (or maybe Halloween), as the days get shorter, stocks tend to be at their lowest prices of the year. By January, as days begin getting longer, stock prices tend to reach their highest level. (Whether these effects are weather-related is subject to debate.)
In any case, investors can exploit these seasonal effects, says a 2002 study (.pdf) by economists Mark Kamstra, Lisa Kramer, and Maurice Levi. They calculate that if an investor had put 50 percent of her money in the Swedish stock market and 50 percent in the Australian market in the early '80s, she would have averaged a strong 13.2 percent annual return over the next 20 years. But had she used a seasonal strategy – all the money in Sweden's stock market when it reached its fall equinox in September and then switched it all to Australian stocks during its fall equinox in March – she would have averaged a whopping 21.1 percent annual return, they found.
Of course, averages over 20 years mask a lot of variability. This year, contrary to the prevailing trend, US stock indexes rose anywhere from about 25 percent to 50 percent between the spring and fall equinoxes.