Is The Stock Market Rally Over?
According to investment legend Jeremy Grantham, a huge rally could be on its way. If Grantham is correct, then you don’t want to be out of stocks starting October 2014. According to his observations, investing in the 3rd year of a US presidential election cycle – starting your “years” at the end of the third quarter (instead of at the end of the calendar year) is when stocks make all their gains.
Stansberry Research Analyst Steve Sjuggerud recently put Grantham’s theory to the test, by crunching the numbers using data dating back to 1932. Surprisingly nearly all the gains in the stock market occurred throughout the third year of the election cycle starting and ending as outlined above.
Check out the table below:
“The rest of the years are all basically a wash with each other… Years 1 and 2 are both losers… and Year 4 simply makes up for the losers of Years 1 and 2, plus a little bit” said Sjuggerud. “Yes, Year 3’s gains are amazing. But its “win rate” is even better. It has only had one losing year since 1932 – and that was a loss of 1%. That losing year would actually be a winning year if you count dividends. So with dividends, Year 3 has had a perfect track record since 1932″ said Sjuggerud.
It’s hard to argue with success like that” he said. Over the last 50 years Grantham also found that mostly all of the returns in his Year 3 cycle came in the first seven months – October 1 to the end of April. According to Grantham, the results in the U.S. election cycle also translate into positive gains in Japan and Europe too.
That is, when the US election cycle is in Year 3, foreign markets seem to soar and if foreign markets to the US soar, then that bodes well for the Australian market too!! “This Indicator has been flawless since 1932, when you include dividends.
However, there haven’t been many “Year 3’s” in Grantham’s study (mathematically just 12) in the last 50 years. As such, some may put this theory down to pure luck. On the other hand, Grantham may have been onto something pretty special…. If not, it’s been one amazing stretch of good fortune for anyone who was brave enough to indulge.
We may well be only a few months away from the best time, historically, to own stocks! Contact United Global Capital today and speak with one of our financial strategists for a No Cost, No Obligation consultation on 03 8657 7640 or email [email protected] to learn how you can position yourself to profit safely.
The information contained in this report is General in nature and has been prepared without taking into account your objectives, financial situation and needs.