2013 off to a flying start – the seasonal effect on the Australian stock market

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The Australian share market has entered 2013 with solid momentum. After a 3.2% gain in December, the S&P/ASX 200 index is so far up around 5% for the month of January.

It begs the question: does a good January bode well for the rest of the year? And more generally, are there seasonal effects in the market that investors need to be aware of? Maybe it’s usual for the market to rally strongly around these times of the year, only to give back some of the gains later?

A market for all seasons?

It’s often claimed there are seasonal effects on the market. US investors, for example, are especially nervous around the month of October, as it’s often been the month when major historic market crashes have occurred. There’s also the old adage of “sell in May and go away”, which combined with the alleged “Christmas rally” suggests investors do best buying around the turn of the year, and selling by the middle of the year.

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