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Buy in January, Sell in May? The seasonality of commodity performance

Most commodities outperformance is skewed to the early months of the calendar year, according to ETF Securities, one of the world’s leading independent providers of Exchange Traded Products (ETPs).

Article also available in : English EN | français FR

  • Commodity outperformance skewed to the first half of calendar year
  • Research also finds the Commodites Supercycle is a myth

ETF Securities found that adopting a trading strategy of buy in January and sell in May in a commodity basket delivered compelling returns over a 24-year-period.

Conversely, August through to November tended to be particularly weak months for commodities. James Butterfill, Head of Research and Investment Strategy at ETF Securities, said allcommodity baskets and the agricultural, and industrial metals sectors historically showed the strongest signs of early year performance.

"Our research confirms that the ‘sell in May and go away‘ adage does not hold water for equities. However, adopting a trading strategy of buy in January and sell in May for commodities has a better statistical outcome than single-month holding strategies,” he said.

Researchers modelled a trading strategy where an all-commodities basket is purchased at the beginning of January and sold at the end of April and then replaced with cash for the remainder of the year. It delivered annualised returns since 1991 of 6.8% compared to 6.6% for equities.

ETF Securities found that all-commodity baskets, the agricultural sector and industrial metals sector showed the strongest signs of seasonality. Gold was impervious to seasonal effects and petroleum’s performance was too volatile to perform well.

“The causes are complex, but we believe cooler weather in the Northern Hemipshere, and early year inventory decisions are factors. But it is intriguing that these are not priced in,” concludes James.

James Butterfill January 2017

Article also available in : English EN | français FR



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