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Why Taxes, Not Seasonality, Should Drive Your Next Move
- Ascend Advisory Group
- 3 days ago
- 4 min read
Updated: 5 hours ago
By Kevin Kull, CFA®, MBA, Financial Advisor (LinkedIn)
July has historically been the best-performing month of the year. So if you moved to cash last month, odds are you’ve missed a window of return that will be hard to recapture.
Seasonal market patterns—like “Sell in May” and the “Santa Claus Rally”—may have historical data behind them, but they are statistically weak predictors of future performance.
Missing just a few of the best market days (which often cluster around volatility) can derail long-term compounding—even if the investor thinks they’re making a tactical exit.
Strategic tax loss harvesting during times of volatility can add real after-tax alpha—especially when future capital gains events (like RSUs, stock sales, or property liquidation) are on the horizon.
Staying “invested” doesn’t mean passive—it means being positioned to take advantage of inefficiencies, tax rules, and emotional overreactions in real time.
Meanwhile, the summer can present overlooked opportunities—especially for generating after-tax alpha. Strategic tax loss harvesting can offset gains from RSUs, real estate, or concentrated equity positions. Even modest unrealized losses can be repositioned to help reduce future tax drag and increase net returns.
In short: it’s not about riding seasonal waves. It’s about using the volatility they create to your advantage. Let’s talk if you have any pending capital gains or want to explore a more tax-forward allocation strategy.
Seasonality can help predict market returns but isn’t foolproof
You may have heard the popular phrase “Sell in May and Go Away” which originated on Wall Street where money managers would sell right before Memorial Day and go on vacation to Martha’s Vineyard, the Hamptons and other latte-lined streets. When they returned after Labor Day, they would buy back into the market.
Is this a good strategy? Short answer is no – trying to time the market is a fool’s errand where you have to be right twice – when to get out of the market and when to get back in.
Source: S&P 500
Between 1928-2023:
The June-August quarter gave you an average return of 3.4%,
With July giving you the best monthly return of 1.70%.
So if you started with $10,000 back in 1928 and had you “Sold in May and Gone Away:” You’d have about $5.2M at the end of 2023 – not bad.
But if you stayed the course and not sold in May, investing $10,000 in 1928 would’ve grown to $101.7M in 2023!
Have you heard of the “Santa Claus Rally" myth, the week before December 24th?
Over the last 20 years, the Santa Claus rally has given you an average return of 0.385% with 13 winning weeks, five losing weeks and two unchanged. While it’s nice to think there’s a Santa Claus rally, in reality the returns have been pretty muted.
The key takeaway is to not worry about the latest Wall Street jargon or the ups & downs of the market. The key is to stay invested with your long-term money. Because if you try and time the market and miss the best five, 10, 30 and 50 days in the market, your compounded returns will be much lower. See chart below:
Tax Loss Harvesting
Another benefit of staying invested during volatile markets is tax loss harvesting. This involves selling a security with an unrealized loss (QQQ as an example), buying a similar security (VUG), and then buying back the original security (QQQ) after 30 days to avoid the IRS’ wash sale rule.
Realized losses are an asset that can be used to offset realized gains from sales of stock, real estate, or other personal property. $3,000 of realized losses can also be used each year to lower taxable income and any losses left over can be carried over indefinitely.
While achieving high returns in the market is great, you need to consider your after-tax return and how much you’re paying Uncle Sam. Consider these two investors:
Source: sample Ascend data.
Tax efficient investing and after-tax returns are often overlooked as a key component of investing – having an advisor can help ensure you take advantage of these opportunities when they occur in a down market.
Kevin Kull, CFA®, MBA
Financial Advisor, brings nearly two decades of investment expertise, having managed trust portfolios for a large regional bank before advising high-net-worth clients at top private wealth firms. Now at Ascend Advisory, his keen market insights and strategic approach help clients navigate uncertainty and seize long-term growth opportunities.
Wells Fargo Advisors Financial Network does not provide legal or tax advice.