Re: [TSP_Strategy] Will Stocks Rise thru Mid April?

 

Hi Sarah

I'm new to the group.  Could you catch me up on where we should be now.  

Thanks 

On Monday, March 30, 2015 5:21 PM, "sarah_oz@yahoo.com [TSP_Strategy]" <TSP_Strategy@yahoogroups.com> wrote:

 

Opinion: The curious reason why stocks may rise until Tax Day

By Mark Hulbert

Published: Mar 27, 2015 5:41 p.m. ET

The theory, for which there's statistical support, is that the government has a vested interest in making sure there is sufficient liquidity

CHAPEL HILL, N.C. (MarketWatch) — Stock market bulls have a most unlikely ally for the next couple of weeks: the IRS.

You read that right. Believe it or not, the stock market historically has performed at a well-above-average rate in the first half of April, and some advisers think we should be thanking the Internal Revenue Service.

One is Dennis Slothower, who publishes a number of investment services I monitor, including "On the Money" and "Stealth Stocks." Several years ago, he mentioned this possible early-April IRS effect, pointing out to his clients that "the government has a vested interest in making sure there is plenty of liquidity in the marketplace for those needing to pay what is shortly due Uncle Sam."

That means the government will do whatever it can to make "sure the [stock] market holds together as best it can going into Tax Day."

Unlike many of the alleged patterns that the 200 advisers I monitor claim to detect in the equity market's largely random gyrations, this one enjoys statistical support. Consider the experience of the Dow Jones Industrial Average DJIA, +1.49% since 1955, which is when April 15 became the date on which personal income taxes are due.

Since then, the Dow's average gain over the two weeks prior to Tax Day has been a gain of 1.22%. The average advance over the first two weeks of all 12 months is 0.3%, or one-fourth as much.

Of course, it's one thing to document a statistical regularity, and quite another to attribute it to the IRS. Yet it remains a likely culprit; I couldn't find support for the other possible explanations I could think of. Here are two that I analyzed:

• The Halloween Indicator. April is the last month of the seasonally favorable period that begins on Halloween and lasts until the subsequent May Day. But that can't explain strength in the first half of April, since the average first-half gain during the six months between Halloween and May Day has been 0.55%, which — though better than the 0.3% across the first half of all 12 months of the calendar — is still far less than the 1.22% average for the first half of April.
• Stock market strength the previous calendar year. This hypothesis traces to the plausible notion that stronger markets lead to greater capital gains, which in turn leads to more taxes the subsequent April 15. But it turns out that there is no statistically significant correlation between the stock market's performance in a given calendar year and the market's return over the two weeks prior to the subsequent Tax Day.

Note carefully that the market's upward bias in the first two weeks of April may not be enough to overcome round-trip transaction costs on a short-term trade. But that bias may nevertheless be enough to convince you to give the market the benefit of the doubt at least until Tax Day.

I bet you never imagined you'd be thankful for the IRS, did you?

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Posted by: russ bacon <reb5150@sbcglobal.net>

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