What
October Surprise?
In some circles,
the discussion of Ronald Reagan stealing the 1980 presidential
election
is still alive. Perhaps you remember the
scenario. I’ll copy just a bit of a Newsweek article written
11 years after the alleged scandal.
— Prediction
by Newsweek correspondent, Eleanor Clift, on the NBC television
talk
show, The McLaughlin Group, on May 12, 1991:
For
regular readers of this magazine, there is little that is new
in the current flurry of American media reports
on the "October
Surprise" of 1980, other than the fact that Gary Sick,
a retired career Navy officer and a National Security Council
Middle East
Adviser in President Jimmy Carter’s White House, now is writing
a book on the subject. His article in the April 15 New
York Times, and a one-hour sympathetic examination of
the evidence on PBS’s Front
Line, shown nationwide on April 16, left little doubt
among open-minded readers and viewers that Ronald Reagan
campaign officials
promised ARMs and money to Iran to delay release of 52 American
hostages until after the Nov. 4, 1980 presidential election.
Some
may continue to debate the merits of this argument for years
into the future. Frankly, I don’t much care about the debate.
But, I do care about this!
There is a nice little surprise that happens in the stock market
most every October that few people even know about. The nice thing
about this surprise is that it can make you money!
There is a
tendency for the market–more specifically the Dow Jones Industrial
Average–to retreat over the summer months and
into September. Historically, October is the breeding ground for
new market rallies. In fact, statistically most of the DOW gains
happen from October to the late spring or early summer of the year.
The first chart I’ll show you is an example of the October
Surprise for last year, 2002.
Had you simply
bought the DOW in October and held until late spring or early
summer, you would have enjoyed an increase of over 2,000
points–that, my friend, is significant.
Just how significant
is it? Well, let’s see what would have
happened if we just bought the DOW, and held it for one calendar
year instead of the 8 months shown here. Being that we sold in
June, we’ll measure our calendar year from June 2002 to June
2003.
Get
ready . . . here comes the surprise!
The following
chart will show a full one-year time period. That year’s
worth of market activity is between the two vertical blue lines.
The
idea that simply holding stocks or mutual funds for more time
will give better returns is clearly not correct. Timing is not
only important, but critical to achieving the best results. This
might be of some comfort to those who have a lot fewer years
left to retirement than they once did.
If you are
in your 20s, buying shares of mutual funds and then ignoring
them for three or four decades will indeed render
good results in terms of appreciation, provided that you choose
the right funds. But, maybe you are no longer in your 20s. Then
what do you do to achieve the necessary returns? That’s
right–timing. |
