History repeats itself, and so does the stock market


It is common for the industry to claim that timing the market is challenging and in some cases impossible, yet as an expert I am constantly asked to predict where the market is heading.

We know the market is influenced by many factors, including economic conditions, geopolitical events, and investor sentiment, all of which are thought to be unpredictable and difficult to anticipate. But is this really the case?

While I agree that events like COVID and wars are difficult to predict, we know that economies move through cycles from prosperity to recession. There is also a well-researched and documented business cycle and each of these cycles has certain phases that affect the price of the stock market.

how to profit from the asx's holding pattern

We also know that humans are very predictable because if I followed you around for a week, I could have your coffee ready at your favourite café before you walk in the door.

If we accept that humans are predictable, and that cycles repeat, then it is not unreasonable to assume the stock market would be affected by these factors. That's why we have months that are generally more bullish than others. So, what are the best months to invest in the stock market?

Data compiled over the past 40 years shows that April has been the best month to invest in the All Ordinaries Index with an average rise of 2.6%. July is also a good month with an average rise of 2.52%, while December comes in third place at an average rise of 1.72%. Does this imply that April is bullish every year? No, but on average it pays to be invested in April.

The worst month to be invested is June which is down on average 0.53%. While October is often considered to be the worst month, it sits in third place behind September as it is down on average around 0.14%.

So, when should you invest? If you invested in November and stayed in the market until April, history shows that these months are generally bullish. Let me stress again, there is no one size fits all and the figures are just averages over the last 40 years. Any month can be bullish or bearish, so it's wise for investors to consider other factors such as the current market conditions, the fundamentals of a stock and by reviewing how the stock is unfolding on a chart before deciding to invest.

The best and worst performing sectors this week

The best performing sectors include Utilities up more than 1% followed by Healthcare and Consumer Discretionary, which are both just in the red. The worst performing sectors include Financials down more than 3% followed by Energy and Communication Services, as they are currently down more than 1%.

The best performing stocks in the ASX top 100 include Evolution Mining up more than 8% followed by AGL Energy up more than 6% and Cleanaway Waste Management up more than 5%. The worst performing stocks include Amcor down more than 8% followed by National Australia Bank down more than 7% and Mineral Resources down more than 6%.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.