Stock market gains will keep piling up next month
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11/21/2014 6:31 PM
Stock market gains will keep piling up next month
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Stock market gains will keep piling up next
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11-21-14 5:18 PM EST | Email Article
By Howard Gold, MarketWatch November and December tend to do well after
October falters
The weather outside is frightful (especially if you live in Buffalo), but the market
looks so delightful.
My apologies to songwriters Sammy
Cahn and Jule Styne, as well as all
the great singers who've performed
that holiday classic, from Vaughn
Monroe to Dean Martin to Ella
Fitzgerald to Harry Connick Jr.
But as snow and wintry cold have
pelted the Northeast and Midwest
even before Americans sit down to
their Thanksgiving dinners, stocks
have been hotter than an Arizona
summer.
On Friday, the Dow Jones Industrial
Average closed above 17,800 and the S&P 500 Index closed at 2,063.50, both
all-time records and up more than 10% from their October lows, when we all were
going to die from Ebola fever.
Isn't it always that way at this time of year? And if history is any guide, it may get
even better.
According to the Stock Trader's Almanac, rocky Octobers are usually followed by
strong Novembers and Decembers. In all the years since 1950 when October
finished in the red, both indices gained an average range of 3% to 4% in
November and December.
This year, with just one shortened week in November left, both indexes have
gained more than 2% this month.
Over the past century, December has been the Dow's best-performing month,
according to the Bespoke Investment Group, averaging gains of 1.4%. And January
lags only slightly, with average gains of around 1%.
A study by Vichet Sum, a professor at the University of Maryland, found similar
patterns of outperformance in December and January (and February as well) in 70
global stocks markets that he examined.
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Why does this happen? Any number of reasons: tax selling of losing stocks,
professional managers buying outperforming stocks to window-dress their
portfolios, and Christmas and New Year's cheer spilling over to the markets.
$60B Federal Contract Dollars in 2015
Meanwhile, the U.S. economy is doing pretty well, as 2014 appears on track to be
the best year for job creation since 1999. And, in part, because too many of those
jobs pay low wages, inflation is nowhere in sight, although disinflation and
deflation are real fears for Europe and Japan.
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The U.S. market is fairly valued, and earnings growth is strong. And the Federal
Reserve is nowhere near raising interest rates.
So what's not to like? People who sold in the midst of the Ebola panic are rightfully
kicking themselves now. The rest of us who held on are now smiling even as snow
falls and polar blasts chill the autumn air.
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For stock investors, it might as well be spring.
Howard R. Gold is a MarketWatch columnist and founder and editor of GoldenEgg
Investing. Get Howard's free Market Commentary by signing up here, and take a
free seven-day trial of GoldenEgg Investing's simple, low-cost, low-risk retirement
investing plans here. Follow him on Twitter @howardrgold.
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-Howard Gold; 415-439-6400; [email protected]
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(END) Dow Jones Newswires
11-21-14 1718ET
Copyright (c) 2014 Dow Jones & Company, Inc.
Copyright 2014 MarketWatch
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11/21/2014 6:31 PM