A few months ago, I wrote about a financial "seminar" I attended where the speaker failed to impress me with his investing savvy (learn how to find a good advisor). Well, I'm on his mailing list now, and I recently received an interesting communication.
Photocopied on a sheet of pink paper was a letter from him summarizing the findings of a report that appeared in the Financial Services Review. He didn't mention the date, but when I looked it up, it was a 1997 article. He said that the study in question was conducted by four professors from the University of North Carolina, but only two were from there. (I'll stop now, lest finding this fellow's errors becomes a second career for me.)
He wrote, "I think that what they found will confound you, as it did me." Well, I ended up confounded, too, but for a different reason. The study's main finding was . well, here -- read the abstract:
This study reports on the existence of a curious calendar effect -- a relationship between stock market performance and the schedule of the United States Congress. Almost the entire advance in the market since 1897 corresponds to the periods when Congress is in recess. This is an impressive result, given that Congress is in recess about half as long as in session. Furthermore, average daily returns when Congress is not meeting are almost eight times greater than when Congress is in session. Throughout the year, cumulative returns during recess are thirteen times that experienced while Congress is in session.
Got it? The advisor's takeaway was that we should hold Congress more accountable for what they're supposed to be doing, as they're not helping our stock returns very much. I'm not sure how that's supposed to help us invest any better. I suppose we might sell our holdings when Congress reconvenes after its summer breaks and buy them back when Congress adjourns. But that's market-timing, and it carries risks and costs, such as commission expenses every time we buy and sell.
I think we might be better off simply keeping in touch with our representatives in Washington, letting them know what we want them to fight for, such as a level playing field for all investors.
In the meantime, be wary of financial advice you receive, and make sure you can trust the source. Perhaps also pay attention to what politicians are receiving from corporations. Here's a peek at the top all-time corporate political donors, per opensecrets.org (learn more in "Dirty Corporate Secrets"):
United Parcel Service
- JPMorgan Chase
Just one last error I have to point out before closing: The aforementioned letter sent to me by said financial advisor ended, "Hope you are have a great summer!" [sic]
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