Cool in the sense of excellent for stock investors, that is. Instead of fixating on the "January effect", Jason Zwieg's Intelligent Investor newsletter points out, we should focus on the "August effect."
According to Bill Schwert, emeritus professor of finance at the University of Rochester, August has averaged the highest returns of any month, at 1.45%, even better than January -- the month whose supposedly superior results have been touted for years in books, blogs and research papers.
Zweig also reminds us of what happened 39 years ago on August 12, 1982. Without fanfare the most horrendous stock market decline since the Depression ended. Investors contrarian enough to start buying equities would have prospered mightily. Stocks rose 229% before Wall Street had its 1987 panic attack. Thereafter stocks rose another 582% percent before the dot.com bubble burst.
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2 comments:
The reason the bull run began in the stock market is that ERTA had been enacted one year earlier. It took the market a year to fully digest the good news.
The really good news was realization that the battle against double digit inflation was being won. The CPI has risen over 13% in 1980 and over 10% in 1981. By August'82 the annualized rate had dipped below 6%.
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