In the last few years, it seems as though many investors have begun taking some stock market myths very seriously. In this week’s Mullooly Asset Management podcast, Tom and Brendan address two stock market myths that have become prevalent.
Mark Hulbert recently wrote an article about the “Halloween Indicator” that you can find here. He discussed two stock market myths in this piece. The “Halloween Indicator” and “Sell in May and Go Away”, which tend to go hand in hand. These two myths lead investors to believe that every year it’s best to be invested from Halloween until May 1, but on May 1 they should sell and stay out of the market until Halloween.
These two stock market myths are based on historical numbers. In the last 50 years, average returns between October 31 and May 1 have been 6.8%. Conversely, returns from May 1 through October 31 have been just 0.8%. Historical numbers like this are fun for the financial media to create a buzz about. Creating a buzz is their job by the way, and it certainly seems like they do a great job of that. However so far in 2013, the “Halloween Indicator” and “Sell in May and Go Away”, haven’t worked out like they were supposed to. Obviously things could change over the next few weeks,, but right now the S&P 500 is up 6.8% in 2013.
This leads us to another stock market myth. This myth says that September is the worst month each year for investing. If you could look here, you will understand how there have certainly been some terrible Septembers. That doesn’t mean every September is going to be a bad one for investors though. In fact, September 2013 saw the Dow Jones and S&P 500 go up over 2%. Not such a bad month, right?
The main point that Tom and Brendan want you to understand is that these stock market predictions are nothing more than that. They are predictions, like a weather forecast. Historical numbers might be interesting for the financial media to create headlines about, but it doesn’t mean investors have to take their words to heart. That’s why we rely on point and figure technical analysis here at Mullooly Asset Management. It allows us to tune out all the noise created by the financial media, and focus on what actually matters.
Listen to this week’s podcast to hear Tom and Brendan discuss the stock market myths you should stop believing.