Brooke Thackray is a research analyst with Horizons Investment Management. His focus is on seasonal investing and technical analysis.
Top Picks:
SPDR S&P Homebuilders ETF
The home builders sector tends to perform well from Oct. 19 to Feb. 3, leading into the busiest time of the year for home building. During the years 1990 to 2012, the S&P GIC home builders sector produced an average return of 20 per cent and has been positive 86 per cent of the time. Recently the sector has been consolidating, setting up well for the seasonal trade.
Select Sector SPDR-Industrial ETF
The industrial sector tends to perform well from Oct. 28 to Dec. 31. During the years 1990 to 2012, the S&P GIC industrial sector produced an average return of 6 per cent and has been positive 83 per cent of the time. As the economy continues to improve, this sector should continue to outperform the S&P 500.
SPDR S&P Retail ETF
The retail sector typically performs well from Oct. 28 to Nov. 29, the month leading up to Black Friday. Average investors typically enter the retail sector in November, looking for good news from the retail sector as the shopping season starts. Seasonal investors get into the sector ahead of the average investors, at the end of October and exit when there is maximum interest in the sector, at the end of November. Using the S&P GIC retail sector, since 1990, this trade has produced an average gain of 5.7 per cent and has been positive 87 per cent of the time.
Past Picks: July 12, 2013
SPDR Gold Trust ETF
Then: $124.13 (U.S.)
Now: $130.53
Total return: +5.16 per cent
Utilities Select Sector SPDR ETF
Then: $38.64
Now: $39.21
Total return: +2.46 per cent
Altria Group Inc.
Then: $36.92
Now: $36.25
Total return: -0.45 per cent
Total return average: +2.39 per cent
Market outlook:
The U.S. economy is slowly healing, Europe is on the mend and China is showing some signs of improvement. Recently, the S&P 500 has moved to an all-time high and has become overbought. This has taken place just as we are about to enter the start of the six month favourable season for the stock market, which lasts from Oct. 28 to May 5. Despite the overbought condition, entering into the stock market towards the end of October has historically proven to be a good entry point - regardless of market conditions. Although it is possible that the market may correct and bottom in November or December, an investor waiting for a later entry point risks missing out on a strong move in the stock market that often happens at the end of October and November. Some of the best sectors in the stock market at this time of the year tend to be the industrials, technology, home builders, retail, Canadian banks and agriculture. All of these sectors have positive seasonal trends until at least the end of the year.