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3 Things to Remember About the 4th Quarter

U.S. News and World Report Smarter Investor

There’s plenty for investors to watch during the last three months of the year.

Get your holiday gift lists started, break out the cool weather clothes, and get ready to set the clocks back. Nothing says fourth quarter like a 4:30pm sunset. Ugh.

It’s also time for a quick portfolio check-up. According to a recent Bespoke Research report, there is some data that I think provides a few reasons why you may want to make sure your portfolio is ready for the rest of this year.

The Presidential Cycle

The typical blueprint for an average election year has the market peaking on April 6th. This year, the Standard & Poor’s 500 (S&P 500) peaked on April 4th. From there, the average year sees the S&P 500 hit a spring low on May 28th. This year? June 1. Then, the average election year sees a summer rally that peaks on September 7th. This year the S&P 500 hit a summer rally high on September 14th.

So while we are not quite there yet, October 10th usually sees another dip in the market off the summer rally and from there, goes up through the end of the election year, Bespoke says.

The average return during the average election year? North of 19 percent.

This is something to consider if you have some idle cash in your accounts. No assurances, but it’s interesting to see such a similar pattern emerging between this year and the average election year.

The October Effect

Again, with a hat tip to the smart folks at Bespoke, we see that October usually ends up being an OK month when you look at the last 20, 50 and 100 years for the Dow Jones Industrial Average (DJIA).

Over the past 20 years, the DJIA posts an average monthly return of 1.75 percent about 70 percent of the time. Not bad. Over the past 50 years, the average return moves to 0.69 percent about 62 percent of the time, and for the trailing 100 years, it’s at a 0.15 percent return 61 percent of the time, according to Bespoke.

So while it’s not the most amazing return number over the past 100 years, it’s at least positive a good portion of the time. Not bad.

P.S. November and December look good too! But more on that below.

Winning 4th Quarter Returns

Following the above time frames, Bespoke also looks at the average quarterly return for the DJIA.

And guess what?

The 4th quarter has the best average return of all quarters. Over the past 20 years, the DJIA posts an average quarterly return of 5.29 percent about 80 percent of the time. Pretty nice, huh? Over the past 50 years, the average quarterly return comes in at 3.41 percent about 76 percent of the time and for the trailing 100 years, it prints a 2.04 percent return 67 percent of the time.

So as you are getting ready for Halloween (I’m dressing up as Psy and learning the Gangnam Style dance), breaking out the cooking gear you use once a year for the turkey, and getting that gift list together, take a second to look at your portfolio and analyze whether you are invested correctly for what could be an exciting end to 2012.

David B. Armstrong, CFA, is a Managing Director and Co-founder of Monument Wealth Management, a full-service wealth management firm located just outside Washington, DC in Alexandria, Va. Follow David on his blog which can be found on his website, on Twitter at @MonumentWealth and @DavidBArmstrong, and on the Monument Wealth Management Facebook page. Securities and financial planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance referenced is historical and is not guarantee of future results. All indices are unmanaged and may not be invested into directly. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price. Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses. There is no assurance that the investment objectives of this program will be attained. Stock investing involves risk including loss of principal. Asset allocation does not ensure a profit or protect against a loss.

Read the article on U.S. News & World Report here! >>



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