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The Best of What They Said and I Read Week Ending 9/30/18

Short excerpts from articles I found interesting

I may not agree with the author and the following material is not intended as investment advice

Barron’s – September 28, 2018 – Stock Markets Ignore the Brett Kavanaugh Hurricane – by Randall W. Forsyth

  • “…U.S. stocks wound up a strong third quarter, with the Dow Jones Industrial Average advancing 9.01%, outpacing the S&P 500’s gain of 7.2% and the Nasdaq Composite’s rise of 7.14%.”
  • “…While October typically is associated with crashes in investors’ memories, the month usually is positive during midterm election years…The popular perception of October being a peculiarly dangerous month…reflects the historic crashes in 1929 and 1987; the swoons in 1978, 1979, and 1989; plus the 18% collapse in the Dow during the week ended on Oct. 10, 2008, during the financial crisis, the worst week in the publication’s database, which goes back to 1901.”
  • “But midterm-election-year Octobers rank tops for the Dow, S&P 500, Nasdaq Composite, Russell 1000, and Russell 2000…Since 1950, the Dow averaged a 3.1% gain in midterm Octobers, with 12 of them ending higher and five lower.  Indeed, the fourth quarter of midterm years kicks off the best three-quarter span of the four-year election cycle. Combined with the first and second quarters of the third year of a presidential term, that nine-month stretch has averaged a 20.4% gain for the Dow and 21.1% rise in the S&P 500 since 1949. For the Nasdaq, which dates back to 1971, the gain over that span has averaged an “amazing” 32%, according to the publication’s records.”

The Wall Street Journal – September 28, 2018 – The “Dumb” Money Is Bailing on U.S. Stocks.  That’s Smart. - by Jason Zweig

  • “…Does it make sense to invest anywhere but in the U.S?  While the S&P 500 is within 1% of its all-time high, European markets are flat, Chinese stocks are in a deep slump and the Japanese market—after a huge recent run-up—has finally clawed its way back to where it was 27 years ago.  Through Aug. 31, the S&P 500 has outperformed international stocks, as measured by the MSCI World ex USA Index, over the past one, three, five, 10, 15, 20, 25, 30, 35, 40 and 45 years.”
  • “…Lofted by a strong currency and trillions of dollars of fiscal and monetary stimulus, U.S. stocks rose so swiftly out of the financial crisis that they left the rest of the world behind. That spectacular recovery has obscured the historical record.  The U.S. was among the worst-performing stock markets worldwide in the 1970s and the 2000s; it also earned lower returns than the average international market in the 1980s.  While the U.S. stock market has outperformed international markets in recent years, the opposite has often been true for long periods.  Over the 10 years ended in December 1986, international stocks outperformed the U.S. by an average of 6.2 percentage points annually; even over the decade through December 2007, U.S. stocks lagged the rest of the world by an annualized average of 3.1 percentage points.”
  • “…Stocks in the U.S. may be more vulnerable than usual to such a reversal, given how expensive they are. Compared with the rest of the world, U.S. stocks are at their highest valuations on record, according to Bank of America Merrill Lynch—trading for twice as much, as measured by price to net worth, as international shares.”

Kiplinger’s Retirement Report   – September, 2018 – Information to Act On

  • “Retirement Plans – Lump Sum.  The Consumer Financial Protection Bureau offers a guide for employees deciding whether to take a lump sum from a company pension plan.  The eight-page guide includes questions you need to consider as you make the decision and what to expect if you choose a lump-sum payout.  Download Pension Lump-Sum Payouts and Your Retirement at Retirement Security at www.consumerfinance.gov.”

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