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For openers, a quick reminder: this blog DOES NOT dispense investment advice nor make “recommendations”.  The bottom line is that I am essentially a “market geek”, and I look at a lot of “things”.  Then I report the things I find.  Nothing more, nothing less.  Then you the reader are free to accept, ignore, question, explore further, etc. what I report.  I mention this specifically for two reasons:

*Compliance is King

*Sometimes the “things” I find don’t necessarily make a lot of intuitive sense

Take for instance, emerging markets and the U.S. presidential election cycle.

Emerging Markets and the Election Cycle

The bottom line is that some months are better than others.  Figure 1 displays the “favored” months for emerging markets within the four-year election cycle.

Figure 1 – Emerging Markets Election Cycle Calendar

To test this, we use the following index data:

*MSCI Emerging Markets Index

*Bloomberg Barclays Intermediate Treasury Index

Test Period: January 1988 through January 2020

Trading Rules:

*For the months in Figure 1 labeled EEM we will hold the MSCI Emerging Markets Index

*For all other months we will hold Bloomberg Barclays Intermediate Treasury Index

We will also include buying and holding MSCI Emerging Markets Index for comparison’s sake.

Figure 2 displays the growth of $1,000 for the switching strategy versus the buy-and-hold strategy.

Figure 2 – Growth of $1,000 for Switching Strategy versus Buy-and-Hold; 1988-2020

Figure 3 displays some comparative facts and figures

Figure 3 – Comparative Facts and Figures

Summary

So what to make of these results?  Obviously, the switching strategy has generated superior results.  But is this merely a matter of “cherry-picking”?  One can make that argument.  Will the “favored” months listed in Figure 1 continue to be the favored months?  No one can know for sure.

But remember, my job is just to report what I have found. 

Well, for today anyway, my work is done here.

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented does not represent the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.