E Seasonal Trading Patterns For The World's Biggest Economies

The purpose of this article is to illustrate how most major stock exchanges have a seasonal pattern that one can trade based on the macro flow of funds from the national government and current account.

In this first installment, the top five economies of the world will be examined in order of largest to smallest in terms of GDP as shown in the chart below.

Other nations will follow in later articles.

top ten countries by GDP

(Source: TradingEconomics.com)

 

United States

The following charts show the stock market set against the government budget and then the stock market set against the current account over five years.

USA stock market +gov budget

USA stock market + Current account

Total flows for the USA are about three to four percent of GDP for the government sector and two percent of GDP for the current account.

The national flows are greater in magnitude and more important than the external ones. Also, the current account deficit is effectively neutralized because export earnings are only allowed to be saved as US treasuries and not spent into asset markets such as for stocks, real estate or corporate bonds.

Settling the “balance” consisted of gold sales, until the United States finally was forced off gold in 1971. Since then, U.S. deficits have been settled by a run-up of Treasury debt to foreign central banks. For most other nations, the typical payments [IM]balance is foreign debt service, leading to a loss of international reserves (formerly gold, now mainly U.S. Treasury IOUs). The United States is almost alone in being able to settle its payments imbalances on military, trade and investment accounts in government IOUs denominated in its own fiat currency – U.S. Treasury bonds payable in dollars – without constraint

(Source: Hudson, Michael. J IS FOR JUNK ECONOMICS: A Guide To Reality In An Age Of Deception. ISLET/Verlag. Kindle Edition.)

The charts show that seasonally, the flow of funds from government peak in February/March and again in April and September.

A surplus budget month is always associated with a dip in the stock market or the end of a peak.

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Danny Straus 3 months ago Member's comment

Cool idea.

Vivian Lewis 3 months ago Contributor's comment

This is an example of the post hoc ergo prompter hoc fallacy. it's not that simple

which of course is a shame. Moreover the funds listed may not be the best way to get the trend for the foreign market in question. There are more than fund flows within the country which account for market moves, alas.

Alan Longbon 3 months ago Author's comment

Thank you for reading and commenting. I disagree. It is an example of applied sectoral flow analysis where flows of income cause a change in the stock of assets. It uses national accounting to track the flows at the macro level, a thing that on one does nut that was discovered by Professor Wynne Godley and the Post Keynesian school of economics. It has been out of favour for the last 50 years or so as it runs counter to current neoliberal economic thinking. It is taught though at the Levy Institute Bard College.

Jimmy Richards 3 months ago Member's comment

So what would you recommend?

Susan Miller 3 months ago Member's comment

Fascinating.

Alan Longbon 3 months ago Author's comment

Thank you for reading and commenting.

Harry Goldstein 3 months ago Member's comment

Impressive, it looks like you put a lot of work into putting this together. Thank you for sharing.

Alan Longbon 3 months ago Author's comment

Thank you. It is more a summary of the findings from more detailed articles on each country that I have been doing for some years.

Harry Goldstein 3 months ago Member's comment

Where can I find them? Hope to continue reading your work...

Alan Longbon 3 months ago Author's comment
Harry Goldstein 3 months ago Member's comment

Thanks, but I'm not a fan of Seeking Alpha. I used to be but a lot of the content has gone downhill. And there's simply too much "fake news" on that site: www.zerohedge.com/.../sec-cracks-down-fake-news-pump-and-dumps-targets-seeking-alpha-benzinga

I'm too old to waste time there. But glad it works for you.

Alan Longbon 3 months ago Author's comment

I agree with you and there are about 3 authors there that I follow and the rest I do not. I will be writing here more now that I have discovered it. Here my articles get a lot more page views that weeks at SA.