Pull Up a Chair and Party On!
Interesting article from NY Times:
January 23, 2000
If History Is Any Guide, the Party May Continue
The end of the millennium sizzled, with the Standard & Poor's
500-stock index up 14.5 percent for the fourth quarter of 1999.
So it is fair to assume some investors expect a pullback in the
market this quarter.
Don't bet on it. A recent S.& P. study shows that strong
fourth-quarter gains are likely to be followed by outsized
first-quarter gains in the following year.
The study, published in the Jan. 19 issue of The Outlook, an
S.& P. newsletter, focused on fourth-quarter returns from 1935
through 1998. It noted that the S.& P. 500 had gained 10 percent
or more on only eight occasions.
In these eight instances, the average first-quarter gain for the
following year was 8 percent, four times the average first-quarter
gain of just 2 percent for the entire 65-year study.
Moreover, the following year's outperformance continued into the
second quarter. In the years following those outsized fourth-quarter
returns, second-quarter S.& P. 500 returns averaged 6.2 percent,
compared with 2.4 percent over the entire 1935 through 1999 period.
Given the outperformance in the first two quarters following
double-digit fourth-quarter gains, it is not surprising that full
year returns were also well above average in the following year.
On average the S.& P. 500 gained 19.1 percent in those eight years,
compared with 9.5 percent over the entire 1935 through 1999 period.
For the record, the S.& P. 500 was down 1.9 percent year to date
through Friday. |
