Wall Street's Best Six Months May Deliver Meagre Returns

Jim Paulsen says the seasonal window that has historically rewarded equity investors may fail this time around. The market strategist, speaking to Fortune, argues that lagged economic indicators point to weak returns for the November-to-April stretch that traders have long treated as the market's "best buying season."

The claim carries weight because of the evidence behind it. Paulsen backtested his model against data going back to 1970. The result: meagre returns in periods when current conditions prevailed. More than five decades of market history, in other words, did not rescue the seasonal trade under the setup he identifies today.

The November-to-April stretch occupies a special place in market folklore. Equities have usually boomed during those six months, a pattern so persistent that investors routinely plan their positioning around it. Paulsen's warning targets that orthodoxy directly. In his view, the usual playbook "may not be applicable this time."

His argument rests on lagged indicators. These are economic measures whose effects show up in markets with a delay rather than in real time. When Paulsen runs the current readings of those indicators through his model, the historical analogues cluster in stretches where stocks struggled. The backtest to 1970 quantifies the stakes: returns in those comparable periods were meagre, not merely mediocre.

That finding challenges a widespread piece of market wisdom. The seasonal strength from November through April has traditionally followed the weaker May-to-October period, giving rise to the old adage about selling in May and going away. If Paulsen's framework holds, investors who buy the season this year would be leaning on a pattern whose historical support weakens sharply once current indicator readings enter the picture.

Paulsen's approach differs from pure seasonality studies. Rather than asking how stocks performed in every November-to-April window, he conditions the answer on where lagged indicators stood before each window opened. That conditioning is what turns a generally favourable seasonal pattern into a meagre-return scenario. The distinction matters for anyone allocating capital on calendar cues alone.

The strategist's conclusion does not amount to a crash call. He frames the issue as a case where a normally reliable tailwind may be absent, not a signal of imminent collapse. Meagre returns in his backtest describe a disappointing stretch, and investors weighing the season now face a model that says the usual reward for showing up may not materialise.

For portfolio managers, the implication is straightforward. The next six months have historically offered one of the friendliest windows on the equity calendar, and Paulsen's evidence suggests this iteration may break from that record. Anyone relying on the seasonal trade faces the question of whether lagged indicators deserve more weight than the calendar itself — and on data reaching back to 1970, Paulsen's answer is that they do.