This Rule Says 2019 Will be Good

Investing in the stock market comes with a lot of adages, esoteric rules, and trends. One that I believe in is called the “first 5 days rule”.

History implies that when stocks go higher in the first five trading days of the year, so goes the market for the rest of the year. In 44 instances since 1950 when the first five days were positive, the S&P 500 ended the year higher 36 times.

Stocks finished the first 5 days with a very nice gain, with the S&P 500 up 2.6%. Interestingly, based on the Stock Trader’s Almanac study going back to 1950, when stocks finish the first 5 days higher, the S&P 500 will be positive 82% of the time at year-end with an average gain of 13.3%).

Another so called rule is that the market seldom drops 2 years in a row. Since the end of WWII, stocks have only fallen 2 years in a row three times, according to the Novel Investor.

Based on these two rules, things are set up nicely for this year.

There continue to be 4 main hurdles, each of which I have discussed in depth over the last few weeks.

  1. Earnings – We are in the midst of earnings season right now and so far earnings look pretty good, but investors are scared. If earnings are good, stocks will do well. I believe that the majority of companies that report will exceed expectations.
  2. The Federal Reserve – As long as the Fed doesn’t do any more bone head moves and act like they are out of touch, stocks and bonds should do well.
  3. China – A deal needs to get done and I think it will. When it’s announced, we should see a nice pop.
  4. President Tweet – Have you noticed that his Twitter account has been muted of late and the market is rising? It’s not a coincidence.

*Please refer to recent blog posts for a deeper discussion.

Although there are certainly reasons to be cheerful (part 3), it’s not going to be easy if you are not prepared properly. The latest correction and increased volatility clearly display that the economy and markets are getting harder and more dangerous to navigate.

To help secure a successful retirement and get good returns with the least risk possible, be sure you do your planning, take advantage of forward looking tax strategies, invest you money Tactically (never buy-and-hold) and have an asset protection plan firmly in place-it’s what we help our clients with every day.

Give us a call to see if we can help you. The initial consultation is absolutely free.

Cheers -Keith
916-925-8900

Smart Money Newsletter

Written By: Keith Springer

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