Over the long haul, there’s some alpha to be generated with the help of seasonals but February was also a reminder that momentum and fundamentals trump all. I warned at the start of the month that February was the worst month of the year for the Nasdaq. Well that didn’t turn out to be very useful as the AI boom continued and the NQ rose 5.1%.
Other seasonal trades that I highlighted did better.
Oil followed the seasonal trend (which continues through June) with a climb and Chinese stocks rebounded, just as the Feb seasonals foretold, leaving an interesting-looking candle on the Shanghai Composite monthly chart.
Shanghai Comp monthly
Cable also followed the seasonal pattern with a moderate loss while the Australian dollar and copper weren’t able to capitalize on the seasonal tailwind (though it does continue to blow through March and April).
For China stocks, the positive seasonals continue in March and April. In fact, most stock markets have a positive backdrop for March and the numbers would be better if not for the rout in March 2020. The hayday truly comes in April, which is the strongest seasonal month of the year for the S&P 500 and the MSCI World Index.
On the FX side, March is the second-strongest month for USD/JPY but in light of comments from the BOJ’s Takata, I would be more focused on fundamentals.
The euro shows some positive tendencies both against the US dollar and on the crosses.
Overall, it’s not a huge seasonal month but some of the shine was taken off by COVID in 2020. The real trade may be setting up for April strength, which could coincide with stronger signs of central bank easing.