it's the summer -- bears are always active during this part of the year. Have you read Newman's latest?
>>For the last few years, we have commented upon seasonal effects, calling the May to October period the Dead Zone. Throughout the period covering 1950 to the present day, virtually all of the stock markets gains have come in the period November through April, and virtually none from May to October. In fact, $10,000 invested for just the months of November to April would have grown to $465,472 since 1950. The same $10,000 invested solely from May through October would have gained less than $115! Several reasons have been advanced for the strange seasonal behavior of stock prices and they do make sense. One is that year end bonuses are anticipated and acted upon late in the year and other bonuses are paid out early in the new year and are then invested. Plus, the arrival of tax season brings the IRA deadline into view and investments are compressed into a short time frame. Clearly, the cause for the effects go beyond these simple explanations since our chart dates back more than a half century. But whatever the causes are, they are readily visible in the effect. Given our perspective that we are likely in the midst of what will turn out to be the worst bear market of our lifetimes, we expect the upcoming May to October period to under perform the average May to October time frame by a wide margin. We still believe that bullish sentiment is the stock market's biggest enemy. Simply put, the Dow has come back so often and so quickly from the precipice since 1987 that folks truly believe that all is required is a few moments of patience for profits to reappear. The favorable November to April stretch has witnessed only two episodes where prices fell by more than 10%. However, the Dead Zone has accommodated nine such periods, the last of which was last year. Although back-to-back Dead Zone periods of worse than 10% losses have yet to occur, we believe the scene is now set for such a circumstance.
As our next chart shows, there is a clear distinction between secular bull and bear phases for the Dead Zone. If the current bear market plays out anywhere near like it did from 1966-1982, the Dead Zone will provide a very costly experience for investors. And in reality, the results are far worse than they appear here. Monies invested solely during the Dead Zone from 1966-1982 fell by a resounding 54.2% but that was before the effects of inflation. With inflation factored in, the constant dollar loss was a whopping 84.6%! Consider that when the folks on Wall Street tell you to be invested all year round.
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