Hey there everyone, Dave Keller here with Market Misbehavior and welcome to our latest episode of the Market Misbehavior podcast. Our goal with this podcast is to sit down with top market practitioners, learn about how they approach the markets, understand some of the tools and techniques they're using to understand current market conditions, get a sense of their outlook forward from today. Great interview today with Jeff Hirsch. Jeff is the editor of the Stock Trader's Almanac. Jeff's father, Yale Hirsch, is credited with popularizing seasonality and seasonal trends and promoting the benefits of looking at seasonal cycles, contributing many words of wisdom and seasonal wisdom that are taken for granted by modern traders and modern investors. Had a great opportunity to ask Jeff about surprises through the course of 2025, comparing what actually happened to the traditional seasonal playbook or the traditional playbook for a post-election year. Then we looked forward to 2026. What does the Stock Trader's Almanac tell us to expect over the next 12 months? What is a midterm election year? We'll look at the previous midterm election years, talk about some of the macro influences that could cause a diversion from the seasonal tendencies. Great interview, I hope, kind of dispelling some myths about seasonality, but also giving you some specific ideas about what to be looking for and thinking about in the months to come. Enjoy this conversation, please, with Jeff Hirsch of the Stock Trader's Almanac.
Super excited to be chatting yet again with Jeff Hirsch, editor of the Stock Trader's Almanac. Jeff, you were the go-to expert on all things seasonality. I thought it was a very opportune time to sort of take stock in terms of what's happened in 2025. Look forward a bit. We've got things like the Santa Claus rally, the January effect, some other things I think investors should probably know about. But to start off, how are you? You hanging in there? Okay.
I'm good. It's the season for seasonality, my friend.
Yeah.
I would think so. And it's so funny. It's true that there are a couple times a year where I think people just remember that seasonality is a thing they should know more about. And for me it's that when I've talked to you, I realize how often you get caught in that trap of like in May you think is it sell in May? In December you start thinking Santa Claus rally. And what you've taught me over our conversations over the year, there's a lot more to it than just those two points on the calendar. And particularly things like the four-year cycle, we're going into a midterm year. These are all things I think that hopefully we can tease out in our conversation together. So, look back with us first, Jeff. I mean, when you look at 2025, obviously it's been I feel like it's been such an unusual year in so many ways, particularly this huge macro driver, this AI euphoria that has really caused asset prices to go higher. How would you think looking back at sort of the traditional seasonal tendencies and what actually played out, what made sense in 2025? What surprised you, if anything, about how this year has played out?
Well, I think as you mentioned the four-year cycle, the fact that the post-election year has been the strongest year of the four-year cycle since '85. We're seeing that. The seasonals got turned on their heads with the tariff, you know, Liberation Day, the tariff tantrum, the tariff tumble, a very fast downdraft. Looking at that, it's starting to look like though it wasn't a classic or official bear by many definitions. It may very well have been a reset. We may be at the beginnings of a new bull market. We will need a little hindsight to look at that. So, we had the worst six months, you know, the sell in May period, very positive, you know, and when seasonality doesn't work, it's an indicator. So, as Edson Gould said, you know, if the market doesn't rally during bullish seasons, there's a sign other forces are at play. When that season's over, those forces will really have their say. Conversely, if the market goes up during the bearish season, there's other forces, AI, the tech boom. It dovetails into my super boom cycle analysis that a book I put out in 2010.
So, it's been an interesting year. I'm also diving into some of the Fourth Turning stuff, which is another cycle. I don't know if you're familiar with some of that,
the generational stuff. I'm currently fascinated with it, trying to correlate it with my super boom cycle and it's interesting to me. But you know, so we're in that crisis period. What's happening this year with the battle between left and right and blue and red and Democrats, Republicans and Congress and the White House and there's all sorts of crises going on and I think that's what we're seeing this year. And on top of that we've got this tech boom, you know, which I think is secularly early on, but you know, we might get a little pause, consolidation over the next year or so. We'll see. But,
I'm not as bearish for next year as I initially thought I might be. If you look at the '26 Almanac outlook that I put out on May 30th, we had the reset, you know, that we mentioned with the tariff tumble in April and the fact that there's an easy Fed and we've got several months, you know, I don't know if you saw the recent stuff on the seven-month upstreaks for the S&P.
Yeah. So, you know,
So tell me this, right? And you made a lot of really interesting points there, Jeff, when you're describing 2025. I think a couple of your comments remind me of a point I think you made to me years ago in one of our conversations. And just tell me if you think I'm on the right page here, if you'd edit this way of describing it. But seasonality for me, I always think in terms of headwinds and tailwinds and I think you sort of told me at one point seasonality is what kind of should happen barring some one-off extraneous influence. And so the tariffs come out, it kind of changes the whole dynamic very quickly. So you wonder what 2025 would look like without the tariff tantrum in the first quarter. And maybe it looks a lot like sort of the traditional seasonal pattern. Is that how you kind of think of it in terms of the balance between the seasonal tendencies but then the actual sort of big macro events that can cause huge shifts, right?
I agree. Yeah, that's exactly how we look at it. I mean, we probably would have had some of that weakness in the second and third quarter. You know, especially the August, I mean, September, October were all new high months,
Those are some of the seasonally weakest parts of the year.
That's the weakest and most volatile, you know, months.
For several reasons. You know, a lot of it has to do with the quarterly behavior of institutions.
Yeah. Not just the cultural summer vacation, back to school, back to work vibe that drives it, but institutions drive the market and the economies in the bond market as well. And then there's the October 31st mutual fund or 40-act fund deadline where they have to reconcile their accounting for the current 10 months, the previous 10 months, the calendar year for year-end distributions to shareholders. And that creates that seasonal vortex, the October phobia, the September weakness. So, we had that early, you know, there was a more powerful macro force, tariffs like we haven't seen since a whole lifetime ago.
If even the ones in the '30s with the Smoot-Hawley stuff was
I don't know if it was comparable. I mean, I don't know if we have the information or data to really compare it, but it was similar to it.
Yeah. And significant enough that I think it changed a lot of trends, right, before and after probably.
You had mentioned the super boom pattern and I religiously have the Stock Trader's Almanac. Here's my '26 copy. And we'll put a link so if anyone does not have it by now, they definitely should. It's something I have on my desk to kind of navigate through the course of the year. And I've done that for longer than I can remember. You talked about that kind of super boom. This is something you have one too, huh? What are the
So you had written back in 2010 this idea of the super boom. This is coming off of the 2009 low and in that you talked about incredible strength through 2025 which is pretty much what we've seen, the secular bull market, cyclical bull markets driving higher and sort of moving higher. What can remind us what you saw back in 2010 to sort of give you the sense that this is where we're headed? And if you wrote a book today about what's next, right, does it have a similar title or is the title a little different?
Well, first of all, this was a cycle that Yale discovered. My illustrious late father who created the Almanac back, who created the Almanac in the '60s. He discovered this in '76 coming off of the Vietnam, you know, the end of the war when Saigon fell in '75 and this boom that was beginning. So it's based upon war and inflation. We didn't have the, you know, the first one was World War I and the boom afterwards, the '20s, and World War II and the '50s and '60s, you know, then there was the Vietnam sideways oil embargo bear market stuff. And then we had the '80s and '90s, which is what he was predicting accurately as well. So without getting too in the weeds there, that's what we noticed coming off of the '09 low. Yeah.
And we were earlier than that than he was, you know, because it was a few years later and we also have a little more hindsight. So, we've adjusted actually in that Almanac that you flashed up there on page 11, it goes to there is an update of it, a brief one and the chart. Yeah, you got it. Ah, he knows. So, thank you. We're looking at perhaps, you know, like the August '82 low is the secular bear beginning, not the '74 low, the ultimate low. So '09 would be more like '74. And then we're looking at October 11. And I know some people are talking about 2013 as well. We'll need a little more hindsight to be exact, but I think we're at that stage. So the new title is probably, you know, the super boom goes on. The super boom continues. And if you look at that paragraph, the number I think is 62,430 if memory serves,
Around 2030 with about eight and a half average, you know, compounded annual growth rate of the market. It really dovetails with that Fourth Turning stuff I mentioned. So the new book might be something related to the generational cycle in addition to the boom cycle, the technological boom cycle. And you know, I've got a spreadsheet in the works where I'm looking at the generational, the Strauss-Howe stuff with the turnings, with the secular bull and bear markets, with the four-year cycle. I got to put some seasonals in there, you know, we'll look at, and I think events are important. Like if you look at that chart on page 11 there, it's not a time frame. And I think the Strauss-Howe cycle is also like that where I put like the Gulf of Tonkin resolution, the fall of Saigon, you know, these are 9/11. These are events that mark the beginning or end or inflection point of this cycle. So yeah, I'm actually actively currently thinking about a new wrinkle on it.
I can see the excitement on your face as you're talking about it, Jeff. So I would say please finish that and write that book. That would be, I would love to read that because it's so, and you've alluded a couple times. It's, you know, Neil Howe, William Strauss wrote this book called The Fourth Turning. This came out and this is probably 20 years old, 30 years old. I mean it's been around a while.
I forget what the initial book was. It's been around for a while. They wrote in the '90s but I'm currently reading his latest book which came out in 2023.
The Fourth Turning, like I forget the subtitle, but where we are now. Yeah.
And it talks about, you know, the political climate that we're experiencing. It talks about those crisis things, whether it's the Middle East or the Pacific Rim or Russia, Ukraine. I mean, or it could be something, we've got some internal strife. There's this whole civil unrest thing that's going on. I mean, it's not fully fleshed out and you never know how it's actually going to end, but it's really got my attention right now.
Jeff, if I can contribute anything to this book, and you're welcome to dig into these things. Two things I would say. Number one, I mean, three things. Number one, I think it's brilliant because generational, I mean, we often talk about generational lows, about once a generation you have this big, very viable moment that market history certainly, I mean, at least in my study has definitely had that. The second thing would be within the technical analysis, I guess, umbrella, you have things like the Kondratieff cycle which kind of attempted to categorize that, right? You have different seasons, spring, summer, winter, fall, and different social and socioeconomic things that relate to that. And then I would also say at Fidelity we did some work on the demographic curve and how that would also be a part of that and that ties into the generations as well, right? You have this big influx of people that are all getting old. You have a big influx of people that are all at investing age. They're all retiring. They're all passing wealth on. Some generations are smaller and that creates some hiccups in it. There's something there. I hope that goes into this Stock Trader's Almanac too.
I'm trying to. How are you with Python?
Programming help.
Anyone watching that's ready to contribute some time and effort, let Jeff know for sure. No, we'll talk, you and I will get together on this. We'll have to have
I'd love to. No, this is something I've always been fascinated with that and I know at Fidelity we did some work on that. Just thinking about generational curves and the really important thing you recognize is when you step back far enough, there are these other cycles that we probably just don't appreciate because we're too caught into the short-term nuances. So, yeah,
That's one of the things I was thinking about when I was just sort of reading the book and making notes and putting things together like, oh yeah, this is all great, Jeff. It's easy to predict the long-term future, but people want to know what stocks to buy now. Everyone's like, you know, what's the ticker? Like, I don't care. What's your hot stock pick or whatever. So, I mean, we've got some of that stuff. We've got, you know, Santa Claus rally, another Yale invention, which gets misunderstood. We've got the January effect which you mentioned which is small cap effect and then there's a January barometer. We've got some seasonal trades. We've got a couple sectors coming in play, right?
You know, so there's short-term stuff that we use the Almanac rigor to uncover as well.
For sure. Yeah. Why not apply it to some long-term stuff, too? I don't think that's a bad
Yeah. You know, it's, I don't know. I find the long-term stuff a little more fun. You can see the look on my face. You know,
I was going to say you're lighting up, Jeff. That's the indicator I think you should be most keen to acknowledge. So tell me this. Right. So as we now are getting toward the end of 2025, we've got the last Fed meeting of 2025 this week and we're going into 2026. Talk to us a little bit for those that are not as familiar with the Almanac and your work. How do you look forward to 2026? How do you think about the next 12 months and what does that like midterm year usually look like?
Well, we start thinking about it, you know, 18 months or more ahead of time when we put the '26 Almanac together in the spring, wrap it up around Memorial Day and proof it through, you know, the summer, July 4th and stuff. So, we're thinking about it more like 18 months or so in advance. Yeah.
And the four-year cycle drives it. I mean, each edition is on the four-year cycle. I mean, the '26 is the midterm election year edition. The '25 is the post-election year edition. So there's several pages in each of the editions that relate to the year of the four-year cycle. So that's a driving force there. And the thing about the midterm year, it's the one that's remained weak over many different time frames. The long-term time frames, the short-term time frames. I mentioned the post-election years, the best of the four since '85. Midterm is still the worst. Still has this negative connotation and it has to do with politics and fiscal policy and what the incumbent administration is doing to retain Congress or get it back or minimize the thinning of their majorities, however thin they might be. And we see this weak spot of the four-year cycle in Q2 and Q3. Surprise, surprise, sell in May period or six months. But it sets up the sweet spot which is from Q4 midterm year to Q2 pre-election year, like 20% Dow and S&P almost 30. It's 29.6%. I mean there's a full page on it in the '26 Almanac for NASDAQ. I mean Yale called it the bottom, midterm years the bottom picker's paradise. We had the, you know, textbook quintessential October midterm bear market bottom in '22. I wouldn't expect it to be as perfect next time around. And initially, you know, we had thought we might be a little bit weaker, but rethinking the reset of the April tariff tumble and looking at some of the sixth year of presidencies, which is on the chart on page 10, I think, across from the one you were just looking at, and the second Republican midterm years.
Kind of the upper end but more in the sort of average annual performance, 8 to 12% is what we're looking at S&P. And initially I thought we might get some bear market action next year. I'm not convinced. Probably get a soft patch. Maybe look for a low in the June through October period somewhere in there, but we'll see what happens. There's going to be some macro events. I mean the tariff stuff might start to have some impact, take some effect into next year. We're going to have a new Fed chair. There's always the geopolitical arena and the exogenous event front like we had in February '22. Yeah.
But all things being equal, probably be a soft patch in the middle of the year, seasonal weakness. And then another rally. Oh, one of the other things off the midterm low to the pre-election year high is an average of about a 50% gain in the Dow.
