Guosen: Is the A-share calendar effect still effective?

Guosen released a strategic research report stating that the market returned enthusiastically after the May Day holiday, with the Shanghai Composite Index approaching the high point of early March at 4197 points. The calendar effect does exist historically, and the essence is that the market focus is different at each time point. In recent years, the "Sell in May" phenomenon in the A-share market has significantly weakened, and the summer market performance in bull markets is not bad. The market may experience short-term fluctuations, but the upward trend remains unchanged. The mid-May meeting between Chinese and American leaders is approaching, which may deepen consensus in relevant core areas and help boost market risk appetite. Structurally, it is important to focus on balance, with technology being the medium-term theme, and emphasis on liquor, real estate, and resources. Guosen's main points are as follows: The calendar effect does exist historically, and the essence is that the market focus is different at each time point The A-share market does have a clear calendar effect. By reviewing the monthly gains of major broad-based indices since 2005, it can be seen that February and November tend to show good returns and higher success rates. This reflects that the A-share market has certain seasonal patterns in different time windows. Common calendar effects include spring volatility, decisive April, and "Sell in May," among others, which are mainly due to the different focus of investors at each stage of the year. Investor sentiment is high at the beginning of the year, often leading to spring market volatility. With limited fundamental data available at the beginning of the year and a relatively loose liquidity environment, investors' risk appetite is usually higher, leading to spring market volatility. Historically, the timing of volatile markets varies, with some starting in early December of the previous year and others in early February, with an average duration of 40 days. The spring market often ends before the two sessions, with the average market pullback occurring 22.4 days after the end of volatility. During the volatility period, the market style tends to be more balanced, with faster industry rotation. For example, this year, there has been rapid market heat since the beginning of the year, with noticeable industry rotation intensities in January and February, during which the upstream resources, domestic demand, and hardware sectors have performed well. As March approaches, sentiment in the market tends to heat up again on the eve of the National People's Congress and Chinese People's Political Consultative Conference. The two sessions usually see significant market movements within 20 days before and after the session, with higher success rates in cyclical industries during this period. April is a period of validation for fundamentals and policies The "decisive April" phenomenon is also common in the A-share market. Before April, the economic fundamentals and macro policy outlook are usually unclear. However, as April progresses, macroeconomic and micro-enterprise profit data begin to be disclosed, and the fundamentals gradually become clear. After the National People's Congress, the macro policy outlook also becomes clearer. Therefore, in April, investors can make a more definite judgment on the market. If the fundamentals and policy outlook fall short of expectations, the market often falls due to lack of fundamental support. For example, after a brief market increase in April 2012, a sharp decline started in May due to significant declines in corporate profits. In 2024,... In recent years, there has been a weakening of the "Sell in May" effect in both overseas and A-share markets. From the overseas market perspective, this phenomenon has weakened in recent years, possibly due to two reasons: the rise in the weight of technology stocks, which are less affected by seasonal factors, and a significant increase in passive funds, which has weakened the influence of traditional seasonal trading behavior on the market. From the perspective of A-share markets, this effect may have also become ineffective in terms of average increases. Furthermore, monthly statistics show that from 2021 to 2025, the performance of major broad indices related to A-share markets in May and June is not weak, which may be related to countercyclical policy actions, reduced disturbances in mid-year liquidity, and strengthened industrial narratives. Summer market performance is also strong in bull markets Considering the market environment, volatile market gains during bull markets are often significant, and the differences between summer and winter market performance are relatively small. Since 2005, the average gains for major indices of the bull markets from May to October have been reasonably high, with the average increase for the Shanghai Composite Index at 16.5%, not far from the 19.6% from October to April. Short-term market may experience fluctuations, but the overall trend remains upward The market recovery has continued, with the maximum gains for the A-share market since the low point on March 23 being 15.0%, and for the Shanghai and Shenzhen... Looking ahead, the market's upward trend remains unchanged. The current market is still in a bull market. Historically, a transition from a bull market to a bear market requires signs of overheated overall market sentiment and significantly weakening macro environment. In the current situation, overheating signals have not yet been observed. With positive factors both domestically and internationally pushing the market upward, the upward trend continues. Domestically, the recent positive policy orientation and steady fundamental improvements have supported a rebound in the net profit growth rate of the A-share companies... In summary, the article discusses the calendar effect in A-share markets, the weakening of the "Sell in May" phenomenon in recent years, the impact of bullish markets on summer market performance, and the need for a balanced approach in sectoral investments. It also highlights the importance of technology as a medium-term theme, the potential opportunities in undervalued liquor, real estate, and resource sectors, and the expected continuance of the market's upward trend.