The Seasonal Timing Strategy by Sy Harding is an active, but simple strategy that uses market timings and can be implemented using asset classes and portfolios.

Using this strategy, you do not need to be in the market 100% of the time and expose yourself to additional risk, unlike passive/lazy strategies. You enter the market when the Seasonal Timing Strategy gives an entry signal and exit when the strategy gives an exit signal.

In this article, we will describe in detail the structure of the Seasonal Timing Strategy and backtest it on historical price data.

Looking ahead, we can say that according to our backtests over the past 16 years, the improved (yes, we improved it) Seasonal Timing Strategy has the following performance stats:

• Compound annual return (CAR): 2.95%;
• Maximum drawdown (MDD): -13.67%;
• CAR/MDD ratio: 0.22;
• Standard deviation: 5.84%;
• Sharpe ratio (with a risk-free rate of 3%): -0.01.

Related reading: – You might be looking for a specific investment strategy? (We have hundreds)

Who Is Sy Harding

Sy Harding published investment research on a financial website, Street Smart Report. His firm provided investment research to institutions and serious investors for 26 years. He was frequently ranked in the ‘Top Ten Market Timers in the U.S.’ by Timer Digest.

Sy passed away at the age of 80 on April 21, 2015. Until a sudden illness, Sy lived a vigorous life and continued to publish his highly respected market insights until a few weeks before his death.

Sy’s previous experience was in engineering, when he owned and built two high-tech manufacturing businesses. He believes it was natural from that background that his investment research would involve technical analysis, charting, and the fundamentals that affect markets and stocks.

In 1997, he stopped managing money for others to focus on converting the firm’s newsletter into a comprehensive financial website advisory service to take advantage of the Internet and its potential to become an important method of providing financial research information in greater quantity and detail than could be incorporated into a newsletter.

What Is The Seasonal Timing Strategy Portfolio

Since we need to have a portfolio to backtest this timing model, we will use the following five asset classes with equal portfolio weights:

Asset Class	Portfolio Weight
U.S. Stocks	20%
Foreign Stocks	20%
U.S. Bonds	20%
U.S. REITs	20%
World Commodities	20%

Stocks In The Seasonal Timing Strategy Portfolio

Stocks are equity securities representing an ownership share in a corporation and giving the right to receive dividends if paid. Historically, stocks have shown the highest returns, outperforming all other asset classes such as bonds, gold, and real estate.

The Seasonal Timing Strategy Portfolio includes the following types of stocks:

• U.S Stocks – U.S. large- and mid-cap growth and value stocks that virtually replicate the benchmark S&P 500 stock index;
• Foreign Stocks – non-U.S. large- and mid-cap stocks of different countries outside US that are have a low correlation with U.S. stocks.

For stocks, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:

Portfolio Sector	ETF Name	ETF Ticker
U.S Stocks	SPDR S&P 500 ETF Trust	SPY
Foreign (International) Stocks	iShares MSCI EAFE ETF	EFA

Bonds In The Seasonal Timing Strategy Portfolio

Bonds are fixed-income debt securities that are less profitable and more reliable than stocks. Bondholders are paid before shareholders; thus, it involves less risk than stocks.

Adding bonds to a portfolio reduces its overall return but makes the portfolio less volatile and more resilient to drawdowns during periods of crisis. Bonds have a low correlation with stocks, which improves portfolio diversification.

The Seasonal Timing Strategy Portfolio includes the following types of bonds:

• U.S Bonds – short-, medium- and long-term U.S. treasury, municipal and investment-grade corporate bonds.

For bonds, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:

Portfolio Sector	ETF Name	ETF Ticker
U.S Bonds	Vanguard Total Bond Market Index Fund	BND

REITs In The Seasonal Timing Strategy Portfolio

Real estate investment trusts (REITs) have the same rewards and risks as “traditional” stocks, but also have a historically low correlation with “traditional” stocks and various types of bonds.

Including REITs in a portfolio reduces the overall correlation of portfolio assets and makes the portfolio more diversified and sustainable.

For REITs, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:

Asset Class	ETF Name	ETF Ticker
U.S REITs	iShares U.S. Real Estate ETF	IYR

Commodities In The Seasonal Timing Strategy Portfolio

Commodities are alternative types of investment and include metals, wood, oil, gas, grains, meat, and many other tangible commodities.

The peculiarity of commodities is that their market dynamics do not depend on each other and do not depend on the market dynamics of stocks, bonds, REITs, and other “traditional” assets. Including commodities in a portfolio reduces the overall correlation of portfolio assets, making the portfolio more diversified and sustainable.

For commodities, we have picked these ETFs, which are well diversified, have high liquidity, and a long performance history:

Asset Category	ETF Name	ETF Ticker
World Commodities	Invesco DB Commodity Index Tracking Fund	DBC

Trading Rules Of The Seasonal Timing Strategy

The trading rules of the Seasonal Timing Strategy are like this:

• Daily time frame is used;
• MACD indicator with standard fastEMA = 12, slowEMA = 26, and signalEMA = 9 period arguments are used;
• Buy rule: If it is October 16 the MACD indicator line is above its signal line, and we are out of position, then we buy the asset class on the same day at the closing price;
• Sell Rule: If it is April 21st and the MACD indicator line is below its signal line, and we are long, then we sell the asset class on the same day at the closing price.

Backtesting Of The Seasonal Timing Strategy

Let’s backtest the Seasonal Timing Strategy under the following conditions:

• Described ETFs with the appropriate weights are picked;
• Historical quotes are adjusted for dividends and fixed-interest payments;
• The backtesting interval is from 2007 to 2023.

Portfolio equity curve:

Portfolio underwater curve (drawdowns, i.e. decline in value from a relative peak value to a relative trough):

Portfolio monthly and annual returns:

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Yr%
2007	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	1.4%	-0.2%	-2.0%	-0.9%
2008	-1.9%	0.9%	0.6%	4.4%	0.3%	0.0%	0.0%	0.0%	0.0%	1.6%	-16.1%	5.4%	-6.4%
2009	-9.1%	-9.2%	4.9%	7.5%	-0.4%	0.0%	0.0%	0.0%	0.0%	-0.2%	-2.1%	0.1%	-9.3%
2010	-4.4%	2.6%	4.4%	2.5%	0.0%	0.0%	0.0%	0.0%	0.0%	-0.4%	0.0%	2.0%	6.6%
2011	1.9%	2.6%	-0.2%	3.3%	-3.9%	0.0%	0.0%	0.0%	0.0%	3.9%	-4.5%	0.7%	3.5%
2012	4.2%	2.8%	1.2%	-1.3%	-0.9%	0.0%	0.0%	0.0%	0.0%	-0.9%	1.5%	0.8%	7.4%
2013	2.1%	-0.9%	1.0%	-0.2%	0.0%	0.0%	0.0%	0.0%	0.0%	0.2%	0.4%	1.0%	3.6%
2014	-1.7%	4.1%	0.1%	1.4%	0.4%	0.0%	0.0%	0.0%	0.0%	2.7%	-0.8%	-1.2%	5.0%
2015	-0.5%	2.7%	-1.6%	1.8%	-0.1%	0.0%	0.0%	0.0%	0.0%	-0.0%	-0.4%	-1.6%	0.3%
2016	-3.8%	-0.9%	5.6%	2.1%	0.0%	0.0%	0.0%	0.0%	0.0%	-0.9%	0.6%	2.1%	4.7%
2017	-0.1%	1.0%	-0.9%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	0.2%	0.5%	0.4%	1.2%
2018	1.4%	-1.8%	0.4%	0.8%	0.6%	0.0%	0.0%	0.0%	0.0%	0.0%	-0.1%	-5.8%	-4.6%
2019	0.2%	-0.0%	0.4%	-0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	0.7%	0.1%	0.9%	2.2%
2020	-1.6%	-5.6%	-12.7%	5.2%	2.4%	2.2%	0.0%	0.0%	0.0%	-0.9%	0.3%	1.9%	-9.6%
2021	-0.3%	0.2%	0.9%	1.9%	-0.2%	0.0%	0.0%	0.0%	0.0%	1.3%	0.0%	1.7%	5.7%
2022	-1.9%	-0.7%	4.2%	0.2%	0.0%	0.0%	0.0%	0.0%	0.0%	2.1%	5.8%	-1.9%	7.9%
2023	0.2%	-0.9%	-0.0%	0.1%	0.0%	0.0%	N/A	N/A	N/A	N/A	N/A	N/A	-0.7%

Performance statistics of the timing model strategy compared to the “Buy and Hold” strategy with the same portfolio:

Statistical Metric	Timing Model	Buy and Hold
Annual Return %	0.86%	4.57%
Exposure %	35.17%	99.66%
Risk Adjusted Return %	2.43%	4.58%
Max. drawdown	-32.89%	-47.77%
CAR/MaxDD	0.07	0.10
Standard Deviation	11.09%	16.19
Sharpe Ratio (3% risk-free)	-0.19	0.10

Improved Seasonal Timing Strategy

For stocks and bonds, the original MACD trading rules are not suitable because stocks and bonds are better to buy on market corrections. Let’s inverse trading rules that are related to the MACD indicator.

Improved rules will be following:

• Buy rule: If it is October 16 and the MACD indicator line is below its signal line, and we are out of position, then we buy the asset class on the same day at the closing price;
• Sell Rule: If it is April 21st and the MACD indicator line is above its signal line and we are long, then we sell the asset class on the same day at the closing price.

Portfolio equity curve:

Portfolio underwater curve (drawdowns, i.e. decline in value from a relative peak value to a relative trough):

Portfolio monthly and annual returns:

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Yr%
2007	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	1.3%	-2.5%	3.8%	2.5%
2008	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	-2.7%	5.1%	0.0%	2.3%
2009	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	-2.6%	6.2%	1.7%	5.2%
2010	0.3%	0.1%	-0.0%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	1.0%	-1.5%	4.4%	4.3%
2011	0.5%	0.7%	0.0%	0.2%	0.0%	0.0%	0.0%	0.0%	0.0%	0.1%	0.9%	-0.1%	2.2%
2012	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	-1.1%	-0.2%	0.5%	-0.9%
2013	0.9%	0.4%	0.8%	0.4%	0.0%	0.0%	0.0%	0.0%	0.0%	0.5%	-0.8%	0.6%	2.8%
2014	0.3%	0.1%	-0.0%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	1.5%	0.8%	1.3%	4.2%
2015	0.5%	-0.3%	0.1%	-0.1%	-0.2%	0.0%	0.0%	0.0%	0.0%	0.0%	-0.7%	-0.3%	-0.8%
2016	0.2%	0.2%	0.2%	0.1%	-0.0%	0.2%	0.0%	0.0%	0.0%	0.3%	-0.8%	0.5%	0.9%
2017	1.0%	1.0%	0.7%	0.5%	0.0%	0.0%	0.0%	0.0%	0.0%	0.1%	1.2%	0.0%	4.7%
2018	0.5%	-2.0%	0.1%	0.4%	0.0%	0.0%	0.0%	0.0%	0.0%	-2.8%	-1.2%	-1.7%	-6.6%
2019	6.4%	1.8%	1.4%	1.5%	-0.0%	0.0%	0.0%	0.0%	0.0%	0.7%	0.4%	1.9%	14.8%
2020	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	-3.4%	8.4%	1.2%	6.0%
2021	0.3%	3.1%	1.2%	2.7%	0.0%	0.0%	0.0%	0.0%	0.0%	-0.3%	-3.8%	3.0%	6.2%
2022	-0.4%	-0.2%	-0.5%	-0.6%	0.0%	0.0%	0.0%	0.0%	0.0%	0.5%	0.1%	-1.1%	-2.2%
2023	5.7%	-2.9%	1.5%	0.8%	-0.2%	-0.0%	N/A	N/A	N/A	N/A	N/A	N/A	4.8%

Performance statistics of the improved timing model strategy compared to the “Buy and Hold” strategy with the same portfolio:

Statistical Metric	Timing Model	Buy and Hold
Annual Return %	2.95%	4.57%
Exposure %	19.62%	99.66%
Risk Adjusted Return %	15.01%	4.58%
Max. drawdown	-13.67%	-47.77%
CAR/MaxDD	0.22	0.10
Standard Deviation	5.84%	16.19
Sharpe Ratio (3% risk-free)	-0.01	0.10

There are individual performance stats per asset class since inception:

Ticker	Exposure %	CAR	RAR	Max. Sys % Drawdown	CAR/MDD	Anual Standard Deviation (%)	Sharpe Ratio (3% Risk-Free Rate)
SPY	23.32	5.11	21.93	-16.24	0.31	8.84	0.24
EFA	19.46	5.06	26	-20.78	0.24	8.78	0.24
IYR	18.21	3.01	16.51	-33.05	0.09	10.44	0
DBC	16.74	1.74	10.41	-29.87	0.06	7.96	-0.16
BND	26.4	0.55	2.08	-10.9	0.05	2.35	-1.04

Equity curve of the best-performed asset class (SPY):

Conclusion On The Seasonal Timing Strategy

The improved Seasonal Timing Strategy has a high risk-adjusted return of 15.01% compared to low maximum drawdown of only 13.67% with only 19.62% time exposure. The original timing model has shown the worst performance on stocks and bonds. That’s why we improved it.

This timing model is a universal model that can be used for many other portfolios comprising other asset classes and ETFs.

FAQ:

What is the Seasonal Timing Strategy by Sy Harding?

Sy Harding was an experienced investor and market timer. Before his career in finance, he owned and built high-tech manufacturing businesses. The Seasonal Timing Strategy by Sy Harding is an active investment strategy that involves market timing. It aims to reduce risk exposure by entering and exiting the market based on specific signals generated by the MACD indicator.

How does the Seasonal Timing Strategy work?

The strategy involves using the MACD indicator on a daily timeframe. It dictates buying an asset class on October 16 if the MACD line is above its signal line and selling on April 21 if the MACD line is below its signal line. This approach helps in avoiding prolonged market exposure.

Why include stocks in the Seasonal Timing Strategy Portfolio?

Stocks historically show the highest returns among various asset classes. The portfolio includes U.S. large- and mid-cap growth and value stocks, providing exposure to the S&P 500 index. Bonds, being fixed-income securities, offer stability and reduce portfolio volatility. They are included to balance risk and enhance diversification.