Please remember that if you are working, you can contribute into an IRA for 2024 until the tax deadline on April 15th, 2025. Please let us know if you’d like to make a contribution as soon as possible as it does require some lead time.
Understanding Market Trends: The Seasonal Strength Period
February had some heart break because the S&P 500 stock market index was negative. Past performance cannot predict future performance, but we have some potentially helpful takeaways to share this month.
There is an old saying on Wall Street: “Sell in May and Go Away”. That is because statisticians have analyzed different months and seasons each year to see how the market performs and found some interesting data.
Before we jump into the data, a short disclaimer: It’s important to note that timing the market is difficult and, in our opinion, best left to professionals. Many investors may benefit from just staying invested for the long haul, especially if they are handling a portion of their investments on their own.
Historical Market Performance: What the Data Shows
That being said, here is some data to consider:
Since the year 1970, the Dow Jones Industrial Average earned 0.7% from May until October each year on average, but averaged 7.6% from November to April. Similarly for the S&P 500, it earned 1.6% from May until October and 6.5% from November to April on average over a 55-year period.
Why would the market have a tailwind at certain times of the year?
Why Certain Seasons Might See Stronger Market Performance
No one can say for sure, but there are a lot of anecdotal explanations.
One is that the Fall may have better performance because of Christmas/Holiday spending. Also, from January to April 15th, investors can contribute into their IRA or Roth IRA for the previous tax year before filing their income taxes. Contributions are often used to buy stocks, which can lift stock prices.
Historically, March and April have been good months for the stock market.
Also, in our opinion, the stock market typically does not go up in a straight line, but instead zigs and zags. After setting a new all-time high earlier in February, it’s not unusual to have some “2 steps forward, 1 step back” action, in our opinion, and it could actually be considered healthy in the longer term.
Navigating Market Noise and Emotional Reactions
The Media is trying to get as many clicks and views as possible, and we have received a lot of calls from clients who are worried, riled up, or, in the worst-case scenario, Considering a rash financial decision because of short-term emotions.
At this time, our intermediate and longer-term indicators are still positive, despite concerns with tariffs and government austerity.
Portfolio Management and Risk Strategies
Please keep in mind that we offer daily managed portfolios, and we would be happy to discuss them with you. If our indicators change and say that lowering risk is prudent, we’ll automatically reduce risk.
As of today, in our opinion, there is a chance the stock market will hit new all-time highs before the April 15th tax filing deadline.
Speak With a Trusted Advisor
If you have any questions about your investment portfolio, retirement planning, tax strategies, our 401(k) recommendation service, or other general questions, please give our office a call at (586) 226-2100.
If we haven’t spoken in a while, or you’ve had any changes to your family or finances, please contact us right away at (586) 226-2100 to schedule a review meeting. We would love to meet with you over the phone, via Zoom, or face-to-face to strategize.
Sincerely,
with contributions from Robert Wink, James Wink, Zachary Bachner, James Baldwin, and Daniel Ladzinski
Sources:
- Yahoo Finance – S&P 500 Performance
- Forbes – Sell in May and Go Away Analysis
- Investopedia – Best Time to Trade Stocks
- Sherman Portfolios – Market Indicators
Notes & Disclaimer: Investment advisory services are offered through Summit Financial Consulting LLC, an SEC registered investment advisory firm. Summit Financial Consulting Investment Advisory Firm Representatives do not render tax, legal, or accounting advice. Life/Annuity Insurance products and services offered by the individual insurance agent. Health insurance is offered through Summit Health Services, LLC and Property/Casualty (P&C) Insurance is offered through Summit Insurance Services, LLC and our local P&C agency partners. Please update Summit Financial Consulting LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually, but additional copies are available upon request. Investing involves risk, including the risk of a total loss. Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. Dividends are not included in index returns. This information is provided “AS IS” without any warranty of any kind. Past performance is no guarantee of future results. Representatives of Summit Financial Consulting LLC offer tax preparation services through Summit Tax Services. Summit Tax Services is a DBA of Heemer Klein & Company and they are owned and operated independently.