Can February March?

It’s been more profitable to own stocks in January and July than any other month. Here’s a theory as to why

Finance | Stocks do best in January and July

Stocks are fractional pieces of large businesses. If markets are efficient, there shouldn't be any excess risk-adjusted returns available to investors. But, by looking at 100 years of monthly return data for American stocks, we can see that it has been far better to own stocks in January and July than in September and October.

This data from Robert Shiller, an American economist, shows that January and July have produced the highest average monthly returns over the past century. It also indicates that September and October have done the opposite. January and July are the best months to own stocks for three reasons: tax-loss harvesting, New Year's financial resolutions, and employee bonuses. None of those change stocks' expected risk or return profile, but they are interesting behavioural and structural phenomena impacting stock returns.