Is this a profitable time of year to own stocks?
A reader asks, with regard to my post about S&P 500 volatility through the years:
According to the Stock Trader's Almanac one gets the impression that there was a year end rally in 1929, 1930, 1931 and 1932. Would it have been a profitable trade to own the S&P500 during these years for the period from December to March?
Well, here are the closing S&P 500 numbers for the first day of December, January, February and March, plus the last day of March during those years:
1929-1930: Dec. 2 20.95, Jan 2 21.18, Feb 1 22.93, March 1 23.45, March 31 25.14
1930-1931: Dec 1 16.80, Jan 2 15.85, Feb 2 16.16, March 2 17.52, March 31 16.69
1931-1932: Dec 1 9.38, Jan. 2 7.82, Feb. 1 8.23, March 1 8.35, March 31 7.31
1932-1933: Dec 1 6.73, Jan. 3 6.83, Feb 1 6.67, March 1 5.77, March 31 5.85
So it looks like the stretch from the beginning of January to the beginning of March was a rare oasis of profitability during three of the least profitable years (1930, 1931 and 1932) in stock market history. December and March, not so much. But the January-February charm stopped working in 1933, which happens to be the year that stock prices finally stopped their long fall (the S&P ended the year at 10.10, up 47% from where it started).
Past performance is no guarantee of future results, and I wouldn't assign much of any predictive power to this historical data. There is an extensive academic literature about a January effect in which stocks do inordinately well for the first week of the new year, but even that hasn't held up all that well lately. Still, it would be kind of encouraging to see stock prices fall between now and March 1.
-
1
PARTY LIKE ITS 1929 or 2009?
(melody 1999, Prince)
The artist: WilliamBanzai7I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Coulda sworn it was Wall Street judgment day
The S&P was purple and the DOW was gray,
There were traders runnin' everywhere
Tryin' to run from the destruction,
U know I didn't even careCHORUS
say say Dow headed down to zero Wall Street party over,
oops out of time
So tonight I'm gonna party like it's 1929/2009I was dreamin' when I wrote this
So sue me if I go to fast
But Wall Street is just a party, and parties weren't meant to last
Paper losses all around us, my mind says prepare to fight
So if I gotta die I'm gonna watch Cramer tonightCHORUS
say say Dow headed down to zero--Wall Street party over,
oops out of time
So tonight I'm gonna party like it's 1929/2009intro 2x
Lemme tell ya somethin'
If U didn't come to party,
don't bother knockin' on Paulsons's bailout door
It's burning a hole in his pocket,
and baby he's ready to ask for more
Yeah, everybody's got an unhedged bomb,
we could all die any day
But before I'll let that happen,
I'll dance my irrationally exuberant life awayOh, they say
say bloated leverage party over,
oops out of time
So tonight I'm gonna party like it's 1929/2009
say say DOW heade down to zero party over,
oops out of time
So tonight I'm gonna party like it's 1929/2009we gonna, oww
1929/2009
Dont ya wanna go 1929/2009
Dont ya wanna go 1929/2009
Dont ya wanna go 1929/2009 -
2
On the first day of trading in the New Year 2009, Dow creeps up to above 9000. Trust that this is not due to the euphoric new-year mood, otherwise, it may well be just another momentarily flash in the dark.
Nonetheless, Happy New Year (whatever happiness may mean to whoever the person may be)!
Tan Boon Tee
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