HalloweenEffectThe Halloween effect just might be more of a trick than a treat – think less chocolate and more witch’s brew. The end of October and beginning of November mark the start of the six-month period of November-April during which, historical evidence shows, stocks have outperformed when compared with their performance during the other six months of the year, May-October, or with the performance of a general buy-and-hold strategy. Indeed, over the past year, the numbers seem to indicate something similar for the U.S. stock markets as per a mutual fund stand-in, the Vanguard Total Stock Market Index Fund (VTSMX) – positive returns of close to 10% from November 1, 2013 through May 31, 2014, as opposed to only a little over 5% from June 1, 2014 through October 31, 2014. This outperformance continues to lend credence to the concept of market timing and fuel the debate over active versus passive investment strategies. And so, with another potential bumper period for stocks possibly about to get under way, we owe it to ourselves to address the topic and speak to why we shouldn’t give the wolf in sheep’s clothing any candy; why it is not advisable to indulge in this active strategy in spite of evidence of a persistent seasonal pattern.Continue reading

scary parallel chartFor some reason (probably just because fear sells), a particular chart has been making the rounds of late. It draws a “scary parallel” between the recent performance of the DJIA and that of the same prior to the 1929 crash, implying that a significant decline is impending (maybe). Already just this month three analysts over at The Wall Street Journal’s MarketWatch have penned at least four articles inspired by the graphic (including this retort), after it first appeared in the McClellan Market Report in late November, and more articles than that have been posted since the start of December. What should you do about it? Continue reading