|
By Ray Turchansky
Edmonton Journal
Business Section
Wednesday, August 4, 2004
Also appearing in:
 |
Victoria Times Colonist
Saturday, August 14, 2004 |
 |
|
 |
Calgary Herald
Saturday, August 14, 2004 |
|
|
 |
The Windsor Star
Monday, August 16, 2004 |
During this period when stock markets are moving sideways, it seems virtually everyday there’s a new investment theory to greet the dawn.
Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, "Have the courage to ignore the daily volumes of research, predictions and advice from market gurus. Listen if your want, just don’t get distracted by the noise.”
First came The U.S. Presidential Election Theory.
Nick Majendie, senior vice-president of Canaccord Capital Corp., came up with a bit of research showing that North American stock markets do a lot better during the second half of a U.S. presidential election year than during the first half.
In 19 such years from 1928 through 2000, he found that the Standard & Poor’s 500 index declined during the second half of the year only three times – 9.2 per cent in 1948, 0.6 per cent in 1956 and 9.2 per cent in 2000.
During those same years, the S&P/TSX fell six times, in 1948, 1956, 1976, 1988 and 2000.
The S&P 500 had an average increase of 1.3 per cent during the first half of those 19 years, but nearly 9.0 per cent overall. The S&P/TSX similarly had average gains of 1.4 per cent in the first half and 8.0 per cent overall in U.S. election years.
Majendie predicts oils and mines will lead the way the rest of this year.
A second hypothesis is the Decennial Cycle.
Ron Meisels, president of P&C Holdings, updated original research by the late Edson Gould to show that the S&P 500 has risen in every one of the 12 years ending in the numeral five from 1885 to 1995. In fact, 10 of those 12 years had double digit returns.
That bodes well for next year, 2005.
Meisels also favours resource stocks, saying that in June the fifth leg of a five-leg bull market started that will continue on the Toronto stock market through August or September of 2005.
He sees the S&P/TSX climbing 18 per cent during that period to 10,000, before falling back.
But just when you think it’s safe to go back into the markets with all that cash you’ve been hoarding, word emerges of The Death Cross.
Larry Berman, chief technical strategist at CIBC World Markets, announced last week that the 50-day moving average, or intermediate trend, of the Dow Jones industrial average had sunk below its 200-day moving average, or long-term trend.
This is a cross for a market to bear.
However, Berman questions the effects of this Death Cross, since markets traditionally start suffering before the crossover takes place. And there’s the fact that we’re in a rotational market, which trades up and down sharply, but within a steady range.
That ranks this Death Cross item with those “never mind” news commentaries by the late Gilda Radner on Saturday Night Live.
To his credit, economist Clement Gignac at National Bank Financial suggests we put more stock, as it were, in such things as corporate profits, low interest rates and a strengthening world economy.
The Presidential Election Theory and Decennial Cycle and dreaded Death Cross all make for delightful, light summertime reading.
But they should be treated with the same reverence as The Santa Claus Rally and theories that market movements depend heavily on which league wins the Super Bowl, whether skirt hemlines are rising or falling, and the hours of sunshine on days when you’re making trades.
Adrian Mastracci, investment counsel at KCM Wealth Management in Vancouver, has a number of information filters, including one that says: “Have the courage to ignore the daily volumes of research, predictions and advice from market gurus. Listen if your want, just don’t get distracted by the noise.”
Of course, there is a theory that markets will continue moving sideways after you read any quotes from an investment counsel with double c’s in his last name.
Mind you, it’s just a theory.
|
