Regardless of who you voted for in this election, the stock market voted with the strongest weekly gains not seen in months. If you need a refresher, look at the last few market commentaries I’ve written. All of this took place as the U.S. set a daily record for new coronavirus cases for the third time within a seven-day period.
Market returns based on which party holds the White House is a zero-sum game. It just doesn’t matter. Having said that, there is something that we do take note of. It’s called market seasonality.
The premise of the “Market Seasonality” study is that historically speaking, the market performs far better during the November through May time period than it does from May through November. On its own, that isn’t a particularly profound statement, however, when we examine the magnitude of this effect over the years, its significance becomes clear. Consider this: if you had invested $10,000 in the Dow Jones Industrial Average on April 30 and sold it on October 31 each year since 1950, your cumulative return would be only about $12,750. Meanwhile, the same $10,000, invested only during the seasonally strong six months of the year, would now be worth just under $1 million! Put another way, almost all the growth of the Dow since 1950 has effectively occurred during the “good” six months of the year. The chart below from Nasdaq Dorsey Wright should be a real eye-opener for investors.
If you have any questions, please let me know.
The Markets and Economy
- The world’s largest initial public offering was halted last week just two days before the stock was set to begin trading. The Shanghai Stock Exchange suspended Ant Group’s blockbuster IPO after four regulatory agencies in China summoned controlling shareholder, Jack Ma and the companies top-two executives. The company’s mobile payment system, Alipay, has more than one billion users and handles $17 trillion in digital payments in one year. Mr. Ma’s criticism of Chinese officials stifling innovation appears to have brought his feud with the government to a head.
- Factories around the world are ramping up production despite rising coronavirus infections. The Institute for Supply Management said its purchasing managers index rose to 59.3 in October from September’s reading of 55.4. That is the sixth straight month of expansion.
- Bitcoin has rebounded recently close to a three-year high. The digital currency has surged about 90% in 2020 alone.
- Two large mall owners, CBI & Associates and Pennsylvania Real Estate Investment Trust have filed for bankruptcy protection as operators deal with reduced foot traffic in retail stores. More are expected to follow suit as mall owners try to figure out ways to re-purpose the large structures.
- There were 126.7 million households in the U.S. as of 09/20/2020. The number is split with about two-thirds home owners and one-third renters.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, member FINRA/SIPC. Imvestment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.