Best Six Months Switching Strategy
Shift equity exposure between historically strong and weak seasonal windows
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 95%
The Best Six Months Switching Strategy divides the year into a historically stronger equity period beginning around October or November and a weaker period beginning around May. Rather than interpreting “sell in May” as a permanent exit, the framework rotates exposure according to recurring cycles in investor attention, fund accounting, taxes, vacations, trading volume, and capital flows. Hirsch emphasizes that investors must buy again around October to participate in the stronger window. The episode also cites an out-of-sample examination by David Aronson, who tested the strategy from 1987 forward to reduce backtest bias and concluded that its results showed predictive power beyond chance. In practice, the seasonal switch should serve as a portfolio overlay, with technical and broader market evidence confirming each transition and defensive positioning replacing an undisciplined all-or-nothing approach.
Origin
Yale Hirsch developed the Best Six Months Switching Strategy for the Stock Trader's Almanac, and David Aronson later subjected it to out-of-sample scientific testing.
Core principles
- 01Cash-flow and attention cycles can shape seasonal returns
- 02The November-to-April period has historically been stronger
- 03Seasonal allocation should use evidence rather than folklore
- 04Out-of-sample validation reduces backtest bias
- 05Signals should remain overlays within a diversified process
How to run it
- 1
Define both seasonal windows
Separate the historically stronger November-through-April period from the weaker May-through-October period. Establish exact transition rules before trading.
Pro tip Use consistent market-close dates so annual comparisons remain meaningful.
Watch out Do not change the dates retrospectively to improve historical results.
- 2
Prepare the autumn allocation
Around October, examine whether equities are forming the seasonal turnaround described in the framework. Increase exposure when price action and supporting evidence confirm the transition.
Pro tip Watch small-cap and technology shares because Hirsch identifies October as a frequent bargain period for them.
Watch out October can remain volatile even when it ultimately marks a low.
- 3
Hold through the stronger window
Maintain the planned equity allocation through the historically favorable months while monitoring technicals, policy, fundamentals, sentiment, and flows.
Pro tip Use predefined risk controls rather than assuming the strong window eliminates downside.
Watch out A favorable seasonal average does not make every month or year positive.
- 4
Reassess around May
At the start of the weaker period, reduce risk, rotate toward defensive holdings, or tighten controls according to the portfolio mandate and current evidence.
Pro tip Treat the switch as a spectrum of exposure rather than a mandatory move to cash.
Watch out Taxes and transaction costs can overwhelm the benefit of frequent or oversized changes.
- 5
Validate and repeat
Compare each year's outcome with the strategy's expected pattern and record divergences. Continue using the overlay only while its mechanism and observed performance remain credible.
Pro tip Evaluate performance across full cycles rather than judging it from one summer.
Watch out Do not preserve a deteriorating pattern merely because it worked historically.
In the wild
An investor raises diversified equity exposure after an October turnaround is confirmed by improving breadth and fund flows. Around May, the investor reduces the allocation modestly and shifts part of the portfolio toward short-duration bonds and defensive sectors rather than selling everything.
→ The investor applies the seasonal tendency while retaining diversification and risk control.
David Aronson began testing after the strategy's original publication period, evaluated later observations without relying on the development sample, and compared the results with chance under a scientific hypothesis-testing process.
→ The episode reports that the strategy retained predictive power and avoided relying solely on an optimized historical backtest.
Common mistakes
Selling without buying back
Repeating “sell in May” without defining the autumn re-entry removes half of the switching strategy.
Using an optimized backtest
Selecting favorable historical dates after seeing the data can create apparent performance that does not persist out of sample.
Ignoring implementation costs
Taxes, spreads, and mandate constraints can make a theoretically attractive seasonal rotation impractical.
Is it for you?
Best for
Long-term investors who can make limited tactical allocation changes without frequent trading.
Not ideal for
Investors facing high transaction costs, tax constraints, or mandates requiring constant full equity exposure.
From the transcript
“I always say you got to buy in October to get your portfolio sover.”
“Right, and seeing if any of these systems had predictive power or were just a result of chance.”
“So It is one of the main overlays we have in our newsletter and portfolio construction that we do.”
From the episode
At the Money: Seasonality In Stocks