If you are a regular reader of our eLetters (and we hope you are) you’ve heard us talk occasionally about strong and weak parts of the calendar year; specifically that, in general, the last quarter of a given calendar year tends to be a very good time for stocks to perform well. The first quarter is also good while the mid part of the year is often weak. Indeed, there’s even a thing called the ‘January effect’ which says that if the first week of January is positive and that is followed by a positive month of January, the year will then also see positive returns for equities.

We frequently remind you that the 6 days or so around the end of a month tend to be strong for stocks, and suggest that you keep that factor in mind as you reallocate your portfolios.

So, let me mention again that these are tendencies. That means that they often work, but that one cannot ever count on them as a mechanism to rely on.  A tendency just means that it often works.

With that in mind, as I was looking at a chart of strong and weak days of the month, I thought you might appreciate another group of tendencies, so here goes.

The following table represents the annualized returns for each calendar day of ALL months on the S&P Index* since 1950:

19th:  -34.69%

20th:  -7.10%

21st:  +4.91%

22nd:  -12.04%

23rd:  -2.40%

24th:  -3.65%

25th:  -6.84%

Consider that the S&P 500 Index has averaged gaining 9% per year over the past 70 years.  If every stock market day was created equal, we’d see +9% for each of the above calendar days, but instead every single one falls short of the 9% ‘average’. This certainly provides us no guarantees that we’ll see lower prices this week, but history tells us to lower our trading expectations on the long side this week of each month.

Here’s how we might apply these tendencies. As we’re getting closer to a point where the long-term direction of the markets may be reversing up, we’re planning to add more midcap growth holdings to our client portfolios.  (Those are stocks.)  This month the 19th and 20th were up just a smidge, the 21st was down, and perhaps we’ll see a couple more down days.  With that in mind, and an expectation that we’ll see more strength toward the end of the month, we choose to target the 25th (hopefully a down day) for these purchases.  If (past returns do not guarantee anything remember) the historical tendencies happen to repeat this month we might have the good fortune to add to the stock holdings on another down day (stocks are cheaper then) just in time to see them rise at the end of the month.

If it works, we’re pleased, and if not, we needed the additional holdings anyway.

We’ll see.

Market Minute – As I Said, It’s Only a Tendency  

Well, it’s Friday Morning and the tendency for today to be a ‘down’ day for equities isn’t working out on THIS Friday the 22nd. Again, they are tendencies not guarantees.  Perhaps we’ll be fortunate enough to see a pullback on Monday the 25th. Remember, we’re not rooting for a down day per se. What we are looking for is a buying opportunity.

Headlines can often make an impact on markets – usually only for a short period. One of the exceptions seems to be the trade negotiations with China. When they appear to be going well, US markets have reacted favorably… and vice-versa. This is one headline that doesn’t seem to go away. Today the negotiations look promising. Speaking of headlines, there is positive news in the Eurozone as well – that may be the culprit behind the positive markets this morning.

I also find interesting the fact that round numbers on the equity indexes seem to make the news as well. Note that the Dow index* once again reaching 26,000 (first time in the past 3 months) seems to have top billing in today’s news. Add to that the Nasdaq index* has passed 7500, and the S&P500 Index* is only a skosh away from 2800, and we have a slew of headlines, mostly positive. Before you get overly excited note another headline this morning:  David Stockman (from OMB during the time of Pres Reagan) seems to think that it’s time to run for the hills. That may temper things a bit.  Markets don’t know the difference between 25,900 and the round number 26,000 – but people do. Let’s see how this works out. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk


This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.