Systematic Relative Strength

Below is a chart that highlights how often the Dow has had positive returns by month over the last 100 years. As shown, the Dow has had gains in December 71% of the time, which is the best month by a wide margin. The next closest months are January and August at 63%.

(Click to Enlarge)

Source: Bespoke Investment Group

The table below shows the performance of a universe of mid and large cap U.S. equities, broken down by relative strength decile and quartile and then compared to the universe return. Those at the top of the ranks are those stocks which have the best intermediate-term relative strength. Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong.

Last week’s performance (11/23/09 - 11/27/09) is as follows:

No real distinction in performance between the top quartile and the bottom quartile. Both the top quartile and the bottom quartile performed slightly better than the universe last week.