View/Print a PDF version of this Report

Headlines

---

Redux: The 20-Year Cycle (Part III): This is a look back at a 2021 article written about the 20-year cycle in the stock market. This piece highlights 17 months within each 20 year cycle that have collectively experienced surprisingly - and consistently - poor performance.

Smart / Dumb Money Confidence

Smart Money Confidence: 65% Dumb Money Confidence: 72%

Risk Levels

Stocks Short-Term Stocks Medium-Term

Bonds Crude Oil

Gold Agriculture

Research

Redux: The 20-Year Cycle (Part III) By Jay Kaeppel BOTTOM LINE This is a look back at a 2021 article written about the 20-year cycle in the stock market. This piece highlights 17 months within each 20 year cycle that have collectively experienced surprisingly - and consistently - poor performance. FORECAST / TIMEFRAME None

I am on vacation this week but have decided to rerun some older pieces that have proven useful - and which will hopefully continue to be useful. This piece is Part III of a three-part series on the 20-Year Cycle in the stock market, which originally ran on 2021-02-12. It highlights 17 recurring months within each 20-year period which collectively have experienced surprisingly - and consistently - dreadful results.

This is Part III of a three-part series regarding the 20-year cycle in the stock market.

Part I of this series contained some "Bad News," and Part II contained some "Good News." Part III contains more bad news-that can potentially be twisted into good news. A close examination of stock market performance on a repetitive 20-year basis reveals some months that are consistently poor performers. That's the bad news. The good news is that by avoiding these particular months, an investor might be able to gain an "edge."

The 20-Year Pattern - Part III

The months we will look at are what I refer to as the "Ugly 17". These are 17 months out of every 240 months (i.e., 20-year cycles starting in 1900) that have tended to witness poor stock market performance cycle after cycle.

For our purposes, each 20-year cycle starts with "Year 0" (i.e., 1900, 1920, 1940, etc.) and ends with "Year 19" (i.e., 1919, 1939, 1959, etc.). 

For openers, let's consider just one example. The first month in the "Ugly 17" is "September of Year 0." The figure below displays the price change for the Dow Jones Industrial Average during that month in the past.

As you can see, every 20 years (starting in 1900) - with one exception (1940) - the month of September has come up a clinker. This represents only one of the "Ugly 17" months. The others are:

Now let's consider the performance of the Dow ONLY during these "Ugly 17" months as a whole. The chart below displays the cumulative % +(-) (with an emphasis on the minus sign) for the Dow Jones Industrial Average ONLY during these same 17 months during each 20-year cycle starting in 1900.

 

To get an idea, the table below displays the cumulative % +(-) across each 20-year cycle for:

• Ugly 17 Months ONLY
• All Other Months ONLY
• Buy-and-Hold

So, what's the "Good News" in the "Ugly 17"? By avoiding these 17 months each 20-year cycle (for our test purposes we assume a 0% return during the "Ugly 17" months and a return equal to the percent price change for the Dow Jones Industrial Average during all other months), an investor might have vastly outperformed a buy-and-hold approach.

2024 Update

The chart below displays the cumulative % return for the Dow Jones Industrial Average since the end of 2019 for both the "17 Ugly Months" (blue line) and "All Other Months" (black line). From 2019-12-31 through July 2024:

• All Other Months have gained +125%
• The "17 Ugly Months" have lost -24% 

The next "Ugly Month" in the sequence is May 2025.

Summary

So, can an investor simply "follow the calendar" and outperform buy-and-hold by a significant sum? Well, maybe. The results above are fairly compelling, particularly since they rely on the exact same set of months on a repetitive 20-year basis. Still, as I always say, relying on any type of seasonality requires something of a leap of faith, as there is never any guarantee that what worked last time around will work again this time around.

---

Indicators at Extremes

Click here to view on the site (% Extremes and "Excess" tabs on the dashboard).

% Showing Pessimism: 21% Bullish for Stocks Smart Money Confidence Inverse ETF Volume NYSE Up Volume Ratio S&P 500 Down Pressure Rydex Bearish Flow OEX Put/Call Ratio OEX Open Interest Ratio Insider Buy/Sell Seasonally Adj Risk Appetite Index Mutual Fund Flow (no ETFs) CSFB Fear Barometer % Showing Optimism: 26% Bearish for Stocks NYSE High/Low Ratio Dumb Money Confidence Intermediate Term Optimism Index (Optix) SKEW Index Rydex Ratio Rydex Money Market % AIM (Advisor and Investor Model) Retail Money Market Ratio Options Speculation Index NAAIM Exposure Index AAII Bull Ratio NYSE Available Cash AAII Allocation - Stocks Mutual Fund Cash Level Equity / Money Market Asset Ratio

Phase Table

Click here to view the Phase Table on the site.

Ranks

Click here to view on the site (Ranks tab on the Dashboard).

Sentiment Around The World

Click here to view on the site.

Optimism Index Thumbnails

Sector ETF's - 10-Day Moving Average

Country ETF's - 10-Day Moving Average

Bond ETF's - 10-Day Moving Average

Currency ETF's - 5-Day Moving Average

Commodity ETF's - 5-Day Moving Average