Here are the stock price patterns for the S&P 500 for the last 3 years:
In each year, stock prices: a) peaked temporarily in late April each year, b) then declined shortly thereafter, c) then eventually rose to new highs later in that year or in the next year.
Question: Will this pattern re-occur in 2013?
Answer: I have no idea. There is no way to know if this pattern might re-occur in 2013.
Question: Why have stocks gone up consistently from January to after mid-April the last three years?
Answer: There are literally millions of forces that can alter stock prices. One possible contributing factor that may explain why stock prices have gone up in the last 3 years, from January 1 to after mid-April is: In the last 3 years, stock advisors were generally predicting stock prices would go up by the end of each year. Investors, who wanted to invest in stocks, may have made both: a) that year’s retirement account contributions and b) the previous year’s retirement account contributions (the previous year’s IRA contributions can be made up until April 15th of the following year) in the first part of each year, in the time period between January 1 and April 15th (tax day). If those contributions were a significant enough contributing inflow, that stock investment inflow may have contributed to stocks’ price rise in the January through after April 15th time period each of the last four years, including this year so far.
Question: If this pattern were to re-occur in 2013, how could a stock investor profit from knowing the pattern?
Answer: I’m not going to answer this question. But if you’re curious about the answer to this question, I recommend you discuss it with a financial advisor or two.
As I’ve said recently, I don’t like buying stocks at the high end of their moving average price range. So, to be clear: For any short term investors, I don’t recommend buying stocks at these current prices.
But there is a legitimate question when any asset class is trading above its long term average rate of price appreciation. That question is: When do you sell some of your assets, even in an asset class that has historically appreciated well over the long term? That is a worthwhile question to consider.
Friends, I wouldn’t be writing about my observations about assets if I didn’t think the observations might be profitable, safeguarding, or beneficial to consider.
Disclaimer: These posts are not written by a professional or licensed financial advisor. There’s nothing for sale here. This is just a discussion forum. No one should make any decisions based on representations made on this informal blog. These posts are just one layperson’s opinions, concerns, and observations about asset classes – a part of larger, never-ending discussions. Any signigicant financial decisions should be discussed with at least a few trusted and experienced financial advisors before acting.