Monthly Charts

Chart of the Quarter 2020

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October 2020

Chart of the Month

S&P 500 Cycle Composite for 2020

Overview

  • Here is exactly what we said in January 2020 when we posted the above S&P Cycle Composite without any actual results shown for the year: “Equity markets are historically choppy the first half of an election year and strong the second half of the year when uncertainty diminishes. This chart, weighted 1/3rd by the Four-Year Presidential Cycle, 1/3 by the One-Year Seasonal Cycle and 1/3 by the 10-Year Decennial Cycle illustrates what the trend for the year may look like for equities. When we overlay this chart onto what actually unfolds in 2020, we have one more important input to help us assess risks and opportunities – including potential over-reactions and under-reactions to other timely inputs.”
  • The above chart now includes the overlay of actual S&P 500 Composite data through 10/02/2020. This illustrates how the COVID-19 pandemic crisis abruptly interrupted the normal trend (as one would expect) in March. However, it also illustrates how various economic stimulus actions and perceived investor buying opportunities methodically put the trend back on track through the summer.
  • Looking ahead, uncertainty around the election and other seasonal factors tends to be a drag on the market (trend is more important than level) a short while until election and seasonal uncertainty is exhausted and then trends upwards again.
  • Please note: this chart is not our forecast nor is it a market timing tool. It simply is a useful reference point to assess potential over or under reactions to other inputs. In January 2021, we will repeat the process for 2021 and utilize it as one of many reference points as we continually assess new threats and opportunities.
  • Regardless of who wins the elections, we believe tax-smart investing and tax-smart wealth management will play an even more significant role in the years ahead. In fact, after the election results are in, a variety of legal, moral and ethical tax strategies should be considered by all clients. We have invested considerable time and money into resources to help clients engage in more tax-smart investing and more tax-savvy proactive planning. More to come on these opportunities in the months ahead.

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