Seasonal Stock Market Rationale for "SELL in May and Go Away" (until November)...

The 6-month period from November-April has gained +548.3% for the S&P 500 since 1990, 8 ½ times the +65.1% return achieved during the 6 months from May-October.

Both numbers are aggregate total return performance results calculated for their respective 6-month periods beginning on 05/01/90 and continuing through 04/30/15. 

Source: BTN Research


 

Bull Market Reaches Its 74th Month...

The S&P 500 bull market that began on 03/09/09 is now in its 74th month.

The average bull market for the stock index since 1950 (including the current bull) has lasted 59 months. 

source: BTN Research 

The S&P 500 Extends Its -10% Correction Streak...

As of today, the S&P 500 has gone 1,192 calendar days (i.e., from 10/03/11 through and including 01/07/15) without a -10% or greater drop in the index, the 4th longest stretch without a double-digit pullback in the last 50 years.

Historically, What Do Stocks Do Before And After The Fed Starts Hiking Rates?...

Sooner or later, the Federal Reserve will begin normalizing monetary policy, which means higher interest rates are coming.

This has investors rightfully worried because higher rates mean higher interest costs, which should be bad for profits and ultimately stocks.

Deutsche Bank Chief US Equity Strategist David Bianco examined the history of Fed rate hikes and their impacts on stocks.

"Stocks typically sell-off on the first of a series of rate hikes, but the magnitude and duration of the sell-off depend on conditions," Bianco writes. "During early cycle hikes the initial sell-off was generally small, quickly recovered and further S&P gains came in next three months and longer (like 2004, 1983, 1972). But many sell- offs on late cycle hikes became corrections or even bear markets."

Unfortunately, it's only in hindsight do we know where we are in the cycle.

"Determining whether it’s early or late in the cycle is subjective, but the shape of the curve, inflation measures, years since the last recession can help," Bianco said. "Next year is likely another mid-cycle year and we don’t expect a severe S&P reaction to hikes, but the risk is the Fed hikes too late or too little and inflation accelerates requiring the Fed to hike to levels higher than expected."

Bianco's 27-page research note is riddled with exhibits. But we thought this one was pretty elegant.

It's the average price move of the S&P 500 during the 4 months before and the 6 months after the 1st rate hike. It's the average of the last 7 hikes.

It's not the most helpful chart for people who enjoy obsessing over the details. It does, however, show that the general direction of the stock market tends to be up.


Read more: http://www.businessinsider.com/how-stocks-move-around-first-fed-rate-hikes-2014-9#ixzz3EMoczX9P

Current Bull Market Exceeds the Average Duration...

The bull market for the S&P 500 is in its 66th month.

Since bottoming on 03/09/09 (i.e., 65 months ago), the S&P 500 has gained +220% (total return) through the close of trading last Friday, 08/08/14.

The average bull market for the S&P 500 since 1950 has lasted 58 months.

The Average NASDAQ and Russell 2000 Stock is Already In A Bear Market

There are no perfect stock market indexes that'll give you a complete picture of the state of the market.

Most market-watchers prefer the S&P 500 over the Dow Jones Industrial Average. But the fact that the S&P 500 is with striking distance of its all-time high of 1,897 belies the fact that many stocks in the index and in the market as a whole are way down.

"When we examine breadth in terms of new highs, more specifically stocks that are in ‘striking distance’ to a new high, we see a completely different picture," writes J.C. O'Hara, of FBN Securities. "Often at the end of bull markets, large cap stocks continue to rise and the smaller stocks begin to flatter."

The S&P 500 is cap-weighted, which means larger companies like Apple and ExxonMobil have a much larger impact on how the index moves.

"High cap stocks influence the averages more thus can mask internal weakness," continued O'Hara.

O'Hara's research found that the average S&P 1500 stock is down by more than -12% from their recent 52-week highs. The average stocks in the Russell 2000 and Nasdaq Composite are down by more than -20%, which means you can say they are in bear markets.

"Historically, this sort of divergence does not bode well for the longevity of a market’s upward inertia," said O'Hara. "We went back and examined instances where the market made a new high and looked at where the median stock sat compare to its high. Our data suggests that the current breadth reading is very unhealthy. Not only are new highs diminishing but we are seeing many stocks making new lows. This breadth divergence is a major concern."

O'Hara says this isn't necessarily a screaming sell signal.

"However the powerful message of “there is something wrong” should not go unnoticed," he cautions.


Read more: The Average NASDAQ and Russell 2000 Stock is Already In A Bear Market

Getting Long In The Tooth? The Bull Market Celebrates It's 5th Birthday...

A 5-year anniversary should give pause to anyone who lends much credence to stock market history.

Going back to 1921, the current bull market's rally is only 2 percentage points shy of the average performance. And the average bull market has lasted only 6 weeks longer.

The median bull-market return and duration are +115.4% and 50 months, respectively—leaving the current bull market looking long in the tooth indeed.

Chart of The Day: The Dow's Average Year vs Its Average Mid-Term Election Year

Chart & Analysis Courtesy of Chart of The Day

Today's chart illustrates how the stock market has performed during the Average Mid-Term Election Year versus the average year.

Since 1950, the First 9 Months of the Average Mid-Term Election Year have tended to be Subpar (see thick blue line).

That subpar performance was then followed by a significant year-end rally.
 
One theory to support this behavior is that investors abhor uncertainty. To that end, investors tend to pull back prior to an election when the outcome is unknown.

Beginning in early October, however, the outcome of the election becomes increasingly apparent and investors respond by positioning their portfolios accordingly.


Chart & Analysis Courtesy of Chart of The Day

It's Been A Very Long Time Since We've Had A -10% Correction...

As of January 8, 2014, the S&P 500 has gone 828 calendar days (i.e., shown in weekly chart above, from 10/03/11 through and including 1/08/14) without a -10% or greater drop in the index, the 5th longest stretch without a double-digit pullback in the last 50 years.

source: BTN Research

There's An Incredibly High Correlation Between Stock Market Performance & A Decreasing Trend in Jobless Claims...

“As go Jobless Claims, so shall go the Stock Market.” 


“As goes the Stock Market, so shall go Jobless Claims.”

This Disconnect Can't Be Good for Stocks: GDP Tumbles While Stocks Soar?

The S&P 500 closed at an all-time high on Friday, August 2nd.

Meanwhile, estimates for U.S. GDP Growth in 2013 have been FALLING for two and a half years!

How can this disconnect be good for stocks?


Read more: http://www.businessinsider.com/gdp-growth-expectations-vs-the-sp-500-2013-8#ixzz2b8b4GYOb

S&P 500 Revenue Growth is Falling, A Bearish Omen...

Why This Bull Market Is Long In The Tooth...

The S&P 500 bull market that began on March 9, 2009 has lasted approximately 49 ½ months.

The average bull market for the S&P 500 since 1950 has lasted 57 months.

Is A Period Of Low Stock Market Returns Ahead?

The Shiller PE Ratio, or the cyclically-adjusted price-earnings ratio, may be the most respected measure of stock market value.

In short, the Shiller PE is the price of the stock market divided by the average of ten years worth of earnings.  If the ratio is above the long-term average, the stock market is considered expensive.

Credit Suisse's Andrew Garthwaite compiled the annualized trailing 5-year returns based on certain levels of the Shiller PE. 

As expected, the lower the ratio, the better the returns.  But the relationship isn't exactly linear.

Here's Garthwaite's chart. 

At current elevated levels, the Shiller PE is signaling a period of low returns, below +5% annually.

Read more: http://www.businessinsider.com/chart-shiller-pe-returns-2013-1#ixzz2HQXyR0xZ

Why The Average Investor Is Absolutely Abysmal At Investing...

Just how BAD is the average investor at investing? 


According to BlackRock's chart of the week...
They're so bad that they've managed to underperform every major asset class for the last 20 years.  


They've even underperformed inflation!

Volatility is often the catalyst for poor decisions at inopportune times. Amidst difficult financial times, emotional instincts often drive investors to take actions that make no rational sense but make perfect emotional sense.

Psychological factors such as fear often translate into poor timing of buys and sells. Though portfolio managers expend enormous efforts making investment decisions, investors often give up these extra percentage points in poorly timed decisions.

As a result, the average investor underperformed most asset classes over the past 20 years. Investors even underperformed inflation by 0.5%.

S&P 500 Revenue Growth Slumping...

S&P 500 Earnings and Revenue Growth Turning Negative...

It's Deja Vu All Over Again for The Stock Market in 2012...

The stock market forms a triple in top in 2011 and repeats the pattern this year in 2012.

December: Historically, The Best Month of The Year...

18 of the last 21 Decembers have produced a positive total return for the S&P 500.

The average December performance since 1990 is a gain of +2.1%, the best of any month.


Source: BTN Research 

2011 Dalbar Study: Why The Average Equity Fund Investor Will ALWAYS Trail The Market...

From December 31, 1990 to December 31, 2010, the S&P 500 gained +9.1% per year.

But the average equity fund investor has gained less than half of much, only +3.8%!

During the same period, the typical aggregate bond index gained +6.9% per year.

But the average fixed income investor has earned 7 times less!!!, only +1.0%!

BOTTOM LINE:

1. Sadly, over the past 2 decades, investors haven't built any real wealth during neither the past 10 years nor the past 20 years. Taxes, inflation, fear, greed, the business cycle, financial crises and market meltdowns all conspired to, not grow, and not even maintain, but shrivel the purchasing power of the average investor.

2. The vast majority of passive investors simply don't have and never will have the psychological discipline to keep the faith during bear markets meltdowns of -30%, -40% or -50% that decimate their retirement nest eggs.

And who can blame them?

Thankfully, there is a better way.