Seasonal Model Update: Gold Stocks - John Rothe | Portfolio Manager, Quant, Tech Geek, And Sometime Superhero To My Kids

Seasonal Model Update: Gold Stocks

FSAGX-john_rotheOne of the models I use in the ARTAIS Fund, is a seasonal model. The seasonal model is based on the fact that markets are historically stronger during certain periods of the year. For example, from 1940 to 2009 the average daily gain from November to May for the Dow was 27 time higher than the average gain for all other days.

The seasonal model I use takes this concept one step further – invest in the strongest sectors during historically strong periods. We are now entering a period where gold stock are historically strong.The Barron’s Gold Mining Index has shown a gain for gold stocks during the month of September 22 times over the past 31 years, sporting an average gain of +5.7%.

The returns have been very impressive for the seasonal model. We backtested the model with the following rules:

  • Invest in the technology sector at the close on the last trading day of October.
  • Sell investments in the technology sector at the close on the last trading day of January and invest in the energy sector.
  • Sell investments in the energy sector at the close of the last trading day of May and hold cash (or money market) during June, July and August.
  • Invest in gold at the close on the last trading day of August.
  • Sell gold at the close on the last trading day of September and hold cash during October.

artais_seasonalImpressive results for such a simple model.

(Disclaimer: I/my client(s) are long FSAGX and/or GOLDX and I may initiate further positions within the next 72 hours.)

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