With the start of a new seasonal market cycle, we examine how the weak and strong "seasons" have historically affected sector returns.

As we have discussed over the last couple of days, the beginning of November brings the start of the “seasonally strong” six-month period for the market. This week we have published articles around "market seasonality" and strategies to that attempt to leverage this historical bias. As we have covered, the November to May period has typically provided stronger returns than the six months from May through October. Even though that effect has been more muted in recent years, the long-term picture remains the same. We could hardly hope to explain this bias, much less the severity over time, but the "strong six months" of the year have accounted for almost all the Dow's average annual compounded return since 1950. As discussed in Tuesday’s report, the average return of the Dow during the seasonally strong six months has been better than 7%, while the "other" six months have produced an average return of only about 1% since 1950.

Those who have been following our research for any length of time know that sector rotation is a key aspect of many of our strategies. With the seasonal bias of the market in mind, we began to wonder how individual sectors might be affected by the seasonality phenomenon. While we don't have the same longevity in terms of data for sectors as we do for broad market indices, we have observed performance biases within the past 20+ years, which we illustrate below using the 40 DWA equal-weighted sector indices.

The graphics below utilize our inventory of 40 DWA equal-weighted sector indices, which have been "live" for the duration of our study period (most have been published since 1998), as well as a handful of benchmarks tracking equity and bond markets. The study includes market data from April 28, 2000, through October 31, 2025, tracking the returns of each index in the seasonal periods (the weak period spans May 1 through October 31, while strong periods span November 1 through April 30 of the following year). The results are displayed in graphs sorted by the "median" return of each index during each seasonal side of the study period, as well as the "min" and "max" returns during the respective periods. We’ve included each graphic along with key observations from each seasonal period.

Key Observations (Weak Season - May - November)

• Despite it being the "weak" period, only five of the 45 sectors and ETFs on our list were in the red from May through October this year. 
• Over the longer term, however, only 10 sectors have a median return higher than the S&P 500 (SPX) during the seasonally weak period. 
• Semiconductors have historically been among the worst performers during the seasonally weak period. But, this year, they were second best performing group, gaining more than 60%. 

Key Observations (Strong Season - November - May)

• Sector participation has historically been much stronger in the seasonally strong period as only 12 sectors and ETFs show a median return lower than the S&P 500.
• Bonds show the lowest median return of any of the funds/sectors on our list, which is consistent with the tendency towards strong equity performance. 
• None of the sectors/ETFs on our list show a negative median return for the seasonally strong period.