Bear and bull markets characterize the level of investors' collective negative or positive sentiment, with an eye to forecasting rallies or recessions. These periodic shifts offer even the long-term investor with a lot of food for thought – or action. One could be fascinated by the impact of all sorts of seasonal sentiments: Such as the New Year stock rally; or spring being a good time to take profits; or negative returns when the autumn season and darker days recur - symbolically and literally.
But now, heads up: Winter is coming. Q4 will pave the ground for final company adjustments before the preparation of next years' Q1 annual reports commences. The expression "sell in May and Go Away" describes the end of spring optimism of returning light, and the need to realize positive returns before the historical underperformance between May and October sets in¹. Eventually, September arrives: historically the month with the highest negative returns. The September Effect refers to the historically weak stock markets in September, being the year's worst performing month on average, based on data going back almost a hundred years².
So, we've coined our own new expression to describe the autumn season strategy. For the occasion, it might be better suited using the American English term, "fall" season:
"September is disaster, pick up stocks thereafter"
Could building and following an annual investment savings plan be a way to consciously tune into the rhythms of market sentiment? Patience is a virtue, and for the long-term investor a regular saving plan is usually beneficial.
In practical terms, this could for example mean implementing a monthly savings plan, with a biannual profit-taking in May and a slightly increased investment in late October after the commonly experienced autumn correction. Recession fears are justified in 2022. Uncertainty is the ultimate price to pay for market participation. One can dampen fear by gently tilting investments, and avoiding timing risk by making portioned investments rather than taking giant leaps. Stock pricing is inherently linked to human psychology − and so is the annual cycle of financial planning in companies. Though timing the market is hard, timing the collective psychology of its participants might be easier over time.
For the Solutions strategies, a long-term perspective is built into the investment philosophy. We prefer quality companies with strong top-line growth and global market reach. Having a great position in a growth segment linked to one of our four solution themes: Renewable Energy, Smart Cities, Circular Economy or Equal Opportunities is a prerequisite for our funds to invest in a company. While the annual seasons take their turn, autumn is historically an opportunity to seek new investment ideas.