Therein lies part of the reason. The sun is shining so I am less likely to worry about research and more likely to tackle weeds or soak up photons. Prices are driven by supply and demand. People take vacations in the summer. Fewer of them are thinking about investments. Therefore demand diminishes and prices relax. They can relax so much that summer returns are negative.

 

According to some it works. According to others it doesn't.

 

So, why don't I investigate it further and take advantage of it? Because it is another variant on market timing, guessing the time to buy or sell based on general market conditions. When's the best time to get out? When's the best time to get back in?

 

I buy and hold for the long term, typically years. By ignoring the seasonal trend there are two fewer questions and actions that I have to manage and I can spend more time in the sun. The other aspect for my style of investing is that I am invested in companies. Granted I do that by buying stock, but companies can generate news any time of the year. Small companies are not going to delay a product launch until the fall. They usually need the money as soon as possible. The market may follow a seasonal trend like tides going in and out, but startups live along the edges were eddies can flow the other way.

 

Memorial Day is the end of May and a holiday as well. Holidays, any shortened trading week, experiences a similar decline in demand. So, don't be surprised if trading volumes shrink or prices slough.

 

At the same time, mid-summer surprises are entertaining to watch because they can stand out that much more. First a pop from those who aren't on vacation, and then a larger jump when the rest of the traders return after Labor Day.

 

I am glad to see the summer effect. It can hurt the performance of market driven portfolios, but it is also an indicator that for a few months there are enough people taking time off to enjoy life.

 

Having said that, it is time for me to upload this post and get some chores done so I can enjoy the sunshine. Dinner on the front porch. Ah. It is a bit of a holiday every day.