The month of October gets all the “love,” but since 1990, August has been the cruelest month for stocks. We point this out because calendar patterns lately seem to explain this market better than just about anything else. In 2022, big losses in stocks and bonds arrived right on schedule—during a time of Jewish sabbatical (the Shmita Year).
Our Major Trend Index has four factor categories, and three of them (Valuation, Cyclical, Technical) remain negative. Yes, the bearish “trifecta.” If that sounds like a reprint of one of our Monday MTI memos, bear with us (pun intended). We thought the MTI—with over 125 inputs—was pretty exhaustive. It turns out that it’s lacking entire categories pertinent to stock market action:
We’ve reminded dejected readers throughout 2022 that this year was statistically “cursed” from the onset. It’s a year ending in “2” and a Shmita year on the Jewish calendar, both of which have been associated with far below average stock market returns. More importantly, it’s a midterm election year, traditionally the weakest of the four-year cycle.
With the most speculative year in U.S. stock market history drawing to a close, we could probably all use a rest. How about a rest that lasts 12 months?
The year 2022 on the Jewish calendar is a Shmita year—historically considered to be a year of rest, or sabbatical, following six years of work. Unfortunately, markets have frequently taken this suggestion quite literally! There’s been a major financial disruption in seven of the eight Shmita years dating back to 1966: