Is The Stock Market Rally Over?

Aug 25, 2014 | Securities

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.

[metaslider id=6431]

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 info@ugc.net.au 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.
<a href="https://ugc.net.au/author/joel/" target="_self">Joel Hewish</a>

Joel Hewish

Joel is the founder and CEO of UGC. He is a licensed financial advisor with 15 years experience assisting clients grow, manage and protect their wealth.

Recent News

Episode 114: Have The Markets Reacted To a COVID-19 Normal World?

Episode 114: Have The Markets Reacted To a COVID-19 Normal World?

This week’s edition of the investor exchange podcast kicks off with a discussion on the COVID-19 situation in Victoria. It’s been 20 days since Victoria recorded its last case and is on track towards a COVID normal Christmas. Following that, Louis talks about the benefits of holiday for your mental health which in turn impacts our performance in work and in life. Brett takes us through the changes in stamp duty that will soon be in place for home buyers soon and breaks down what the costs and benefits will be. Finally, Joel provides a share market update and highlighting the current situation in the United States.

STAY UP TO DATE

Subscribe here to receive all UGC updates as they happen

Good Move! Keep an eye on your inbox for our next update.