We all know the phenomenon of “sell in May and go away” in the stock market. But is that really an effective strategy? Here’s a couple of articles we read recently on the subject:
“The argument for “going away”: Over the last 12 months, investors who held to this belief made out pretty well. From May 1-November 1, 2011, the Dow lost 6.7%. From November 2011 through April 27, 2012, it gained 10.7%.
If we open a historical window – specifically, The Stock Trader’s Almanac – back to 1926, we see the S&P 500 rising 4.3% on average during May-October and gaining an average of 7.1% from November-April.”
“On Wednesday April 18th, Jeffrey Hirsch provided election year statistics for the “Worst Six Months”, May to October. The results of that research began in election year 1952 and ran through 2008. 1952 was chosen as the starting point of the study primarily because the U.S. economy (and the global economy) was substantially different prior to that year than now. From 1901 to 1951 farming made August the best performing month of the year. This is no longer the case and August is now the second worst month of the year. In response to inquiries about years prior to 1952, the table from that post has been updated to include all election years from 1904 to 2008.
By including an additional 12 election years in the table, the results differ greatly, but this was expected because, Augusts’ top-ranking performance, the roaring twenties, a Great Depression and two world wars made those years significantly different (a great understatement). In fact, “Sell in October” would have been appropriate. Prior to 1952, May-October was up 32 of 51 years with an average gain of 3.3 % while November-April was up 29 of those same years averaging a gain of 2.4%. Since 1952, November to April (as of today) has been up 47 times and down 13 with an average gain of 7.5% while May to October has been up 35 and down 25 with an average of just 0.2%.
Before deciding if “Sell in May” in this election year is in the best interest of your investment objectives consider this; since 1940, there has been only one double-digit gain from May to October and the average gain is a paltry 0.3% (excluding the best and the worst, the average is 1.2%).”
Graphic from Stock Trader's Almanac
We believe that investors should be careful to not invest or pull their capital based simply on a season, time of year or “gut feeling”. This is definitely an interesting and risky time in the markets, and it’s important to know about the trends and thought-processes – but not necessarily to follow them.
Thanks for reading our podcast summary. If you want more details on what is discussed on the blog, please listen to the full podcast here.
Listen to Doug talk about the short-term and long-term trends, divergences between the U.S. markets and international markets, AAPL news, the Federal Reserve meeting and policy, European debt crisis, and volatility in the markets.
This week’s video covers a lot of ground, so watch it and remember to keep a close eye on the market for better buying opportunities later this year.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present, and a special opportunity for our subscribers. Please check out moneyshow.com to register or for more information.
We expect to invest in emerging markets this year, and want our audience to be aware of changes and trends in this area. Over the last 10 years, here’s what’s happened in emerging markets:
2003 ended the bear market and began a new bull market in the U.S. – 400% increase in emerging markets that year.
2007-2009 emerging markets fell 65%
2009-2011 emerging markets moved up 135%
There are over 100 Exchange Traded Funds for the emerging markets. You can invest broadly or even focus on a single country or industry group using ETFs. We think this is incredible, as it gives investors a chance to invest in as specialized of an area as they like.
While established markets like the U.S. and UK have had centuries of equity investing, the emerging markets are relatively new, and have much greater earning potential than developed markets. We believe that emerging markets offer great potential, and that this is an area that you need have in your portfolio long-term.
This year we plan to invest in emerging markets, but our approach holds that we do not want to buy until the rest of the market starts to panic. When that happens, emerging markets will go on “sale”, and we think that is the best time for investors to jump at this opportunity. If you have questions about when to invest and why, please call us at 800-391-1118.
Thanks for reading our podcast summary. If you want more details on what is discussed on the blog, please listen to the full podcast here.
Politics are swinging between left and right as the European Union tries to deal with their debt crisis. Watching this news unfold is important for investors – we think it’s important to know how austerity, deficit spending, taxation and other economic news affects your portfolio.
That said, here’s some of the news we’ve been following about the political and economic climate in the Eurozone:
Just to bring this a bit closer to home, local politics affects our portfolios as well. Here in our home state of California, we have similar deficit, taxation and spending issues to the EU. Here’s a few of those news stories:
Be careful in the markets and stay aware of how politics affects your portfolio – listen to our podcast every week for up-to-date details and analysis, or call us today for a personalized consultation at 1-800-391-1118
French elections and Apple computer are the two big issues in the markets this week. Here’s why:
APPL has gone into a correction this week and last week, losing about 5%.
On Sunday, the French held their presidential elections. Sarkozy and Hollande are the two run-off candidates, and this matters to the markets because each candidate has such a different approach to how to fix Europe’s debt crisis.
We need to be paying attention to the elections in France and the condition of the European debt crisis because it will undoubtedly have effects on our economy and markets. This article from The Week gives a good soundbite for why we are bringing this up:
“What has Hollande promised to do as president?
He has pledged to increasegovernment spending to spur economic growth. That position is the polar opposite of the policy Sarkozy and German Chancellor Angela Merkel have adopted, encouraging EU countries to cut spending to get their finances in line. The duo, who have worked together so closely that they’re referred to jointly as “Merkozy,” have shaped the EU’s response to the debt crisis, which shows no signs of abating.
Would Hollande’s proposals hurt or help Europe?
It depends whom you ask. Some economists say it ‘is likely to make matters worse, possibly sending financial markets into a tailspin that invites further chaos,’ says Steven Erlanger at The New York Times. Others say boosting economic growth is the key to getting Europe out of its funk. ‘An Hollande victory would shake things up, and offer at least a possibility of something better,’ says Paul Krugman at The New York Times. Plus, some European countries may be starting to turn against Merkozy’s prescriptions: The Dutch government will likely collapse over resistance to new austerity measures, and Spain and Italy are also siding with more pro-growth policies.”
We are keeping an eye on the news from Europe, and it will be interesting to see if France continues to embrace austerity, or if they spend more in an effort to get out of their current debt crisis.
Speaking of paying attention, we asked our readers and listeners last week if you have the right life insurance policy or annuity. This is an important item to keep in mind, and we encourage you to learn what you need and why. Today, I am offering you a FREE insurance and annuity consultation. If you would like to have one of our experienced professionals research and analyze your life insurance policy or annuity contract, then simply call our offices at (800) 391-1118, and we’ll set you up for your FREE life insurance and annuity review.
Thanks for reading our podcast summary. If you want more details on what is discussed on the blog, please listen to the full podcast here.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present, and a special opportunity for our subscribers. Please check out moneyshow.com to register or for more information.
It seems to us that right now, the U.S. is a bullish bastion of strength around the world. International markets are all in short-term down trends, and, in contrast, the U.S. is in a bullish up-trend. This is unusual – usually all markets move in similar directions, and because of this, we think that the markets might be topping out soon.
We are also seeing increased volatility in the markets – last week was the worst-performing week of the year in the markets, but we’re still also seeing some highs. This kind of up-and-down action, plus leaders like APPL and GOOG starting to wane, tells us that the market is a very risky place right now. We think that the market is about to top out and start to correct.
Risk management needs to be a key part of your strategy regarding international investments. If you haven’t yet, listen to our special report from earlier this year to get a better feel for what we are facing this year as investors.
You may wonder why we think that the United States deficit is such a problem, but for every dollar the US Government spends, we borrow .40 cents. This is extraordinary and very worrisome. Many politicians and activists suggest cutting back spending radically, which causes a economic retraction and a difficult situation overall, but we can’t keep up this kind of deficit spending, lest we wind up in a similar situation to what Europe currently faces.
In a presidential election year, the debt and deficit becomes a big debate. Clearly this needs a solution, and Republicans and Democrats can’t agree on how to fix this, although both seem to agree that it needs to be fixed.
No matter what your political conviction, taxes will be a consideration in the next few years. The Bush tax cuts are expiring January 1st, the deficit reduction mandate goes into effect in 2013, Obamacare taxes will kick in soon and politicians are still debating the Buffett rule. Taxes are going to be a serious part of what investors need to be watching this year.
Thanks for reading our podcast summary. If you want more details on what is discussed on the blog, please listen to the full podcast here.
If you’re like most people, you probably own a variety of insurance products. Life insurance is the most widely held financial services product in the country, but did you know that there are also over 20 million annuities in existence? If you own a life insurance policy or an annuity, you need to be aware that there are features and benefits to these contracts that you can use to enhance your financial situation. But beware; there also are fees and expenses associated with these products that could threaten future benefits for you and your family. Let me explain.
When it comes to life insurance, most of us own it as a way to protect our family. If we were to die unexpectedly, our spouse and or dependents would have enough money to replace lost income, pay down debt or pay for college expenses. These are the typical reasons why we buy life insurance. Most people own term life insurance, which covers you over a specified time period (usually when our dependents rely on us most). In this situation, you want to make sure you have the right amount of coverage, and that you are paying a reasonable cost for what you need.
Action Item No. 1:If you have a term life insurance policy, you need to review that policy’s coverage to make sure it serves your family’s needs. You also need to see if what you’re paying for that coverage is reasonable.
In addition to term life insurance, there’s also a type of life insurance that allows you to merge a savings account with a policy to help achieve your financial goals. For example, you can create a personal pension plan with a permanent life insurance policy. This type of policy allows you to save for retirement while also generating a future income stream from your savings. This strategy works well for high income earners who aren’t able to save enough of their income via a 401(k) or other retirement savings plans. These life insurance policies allow you to invest for retirement and family protection WITHOUT downside risk, and they come with full tax deferral and tax free withdrawal, IF they are properly structured.
Action Item No. 2:If you’re concerned that your current retirement savings vehicles may not be enough, or if you have concerns over the amount and cost of your current life insurance coverage, take steps to find out what kinds of life insurance may fit one or both of these needs.
If you have an annuity, you should be looking at your contract in terms of investment performance and costs. Annuities are valuable tools for retirement savings and income generation, but there are complicated options and contract language that are vital to understand. Annuities also carry many internal fees and expenses, and insurance companies traditionally do a poor job of explaining those costs. When it comes to investment options, you need to make sure your annuity is in sync with your overall retirement plan.
Action Item No. 3:If you own an annuity, you need to conduct a review of the investment options, fees and expenses associated with your policy, and you need to compare those with the latest product offerings from the industry.
At Fabian Wealth Strategies, we offer our clients a full service wealth management experience. We know that life insurance and annuities play a key role in our clients’ financial plans, and that’s why we have experienced team members here to help our clients make the most of these financial products. Because there are so many varied aspects to life insurance and annuities, you simply must have an experienced professional on your side to make sense of it all.
Today, I am offering you a FREE insurance and annuity consultation. If you would like to have one of our experienced professionals research and analyze your life insurance policy or annuity contract, then simply call our offices at (800) 391-1118, and we’ll set you up for your FREE life insurance and annuity review.
Make the call today, and find out how you can better protect yourself and your family.
All the best,
Doug Fabian
President, Fabian Wealth Strategies
3070 Bristol St, Suite 610
Costa Mesa, CA 92626
(800) 391-1118
NOTE: Fabian Wealth Strategies, Inc. is a registered investment advisor with the U.S. Securities and Exchange Commission. Doug Fabian is a registered investment advisor representative. The information expressed in this email is for educational purposes only and should not be construed as a recommendation to buy, sell, or hold any specific insurance product. Fabian Wealth Strategies, Inc. is licensed by the California Department of Insurance (License #0G87212).
First, Europe represents 25% of the global economy. Spain is the fourth largest economy in Europe and it is in economic shambles. The Spanish government is cutting severely in entitlements (unemployment benefits, pensions, etc.) and there is no job growth in Spain. People in Spain are more conservative with their money right now, causing a contraction in their economy, looking to contract a total of 7% this year. (To put that 7% in perspective, that’s about how much the U.S. contracted in 2008 – we all know how that affected the markets and economy.)
Second, Apple Computer is a phenomenal company, and it’s almost a stock index in itself. Apple stock alone accounted for 36% of all the earnings in the S&P 500 in the first quarter. We bring this up because if APPL was to falter, we would see some serious issues in our stock market.
Lastly, we want to remind you that stock markets go down 3-5 times faster than they go up. This is an unfortunate reality, but one to keep in mind as you watch the fundamentals and the global economy in changing times.
Before you go on a long road trip, it’s always smart to make sure you have water, flashlight and other emergency supplies in your car. We think of your life and your money as a long road trip – we all have a destination, goals along the way and a few unexpected turns in the road, but with a good road map, some emergency supplies and a little common sense, your financial road trip can fulfill your goals and get you to your destination. We think it’s wise to be educated and prepared in life and investing.
In investing, here are a few turns in the road that might be coming up: a weakening U.S. dollar, inflation or deflation, upheaval in the bond and stock markets, or changes in the real estate market. These can all risks to your capital, or can be used to your advantage, depending on how prepared you are.
Understanding market movements is like your road map on that long car trip. You have to realize what inflation and deflation will do to your capital, and what your on-ramps are (meaning when and why you put your capital to work) for investing.
You need to know what your “off-ramp” is as well – what is your exit strategy for your investments? What is the circumstance in which you would sell your stocks or bonds and are you even aware of what you own?
These changes in the markets can be very confusing if this is not your full-time job, which is why we are here – making podcasts, writing on the blog and helping you make decisions. If you are not sure about your financial goals or you just want a second opinion, please call us at 888-300-3684. Our advisors want to help this investing road trip be a pleasant one and help you get to your destination in the best way possible.
