What happens when the economy gets a virus?<\/p>\n\n\n\n
If you look at the growth of the S&P 500 going back to\n1926, you’ll find an interesting recurring pattern through the months of an\nAverage Year. Almost all months show a positive return on investment, with\nthe average month seeing an average return of .6%. July has been the big\nwinner, with an average growth of 1.6%. September is the only perennial loser,\nshowing an average loss of -1%. In other words, in an Average Year, stocks\ngrow in value for the first nine months, especially in July, fall back in\nSeptember, and then grow again through December.<\/p>\n\n\n\n
But every fourth year, those statistics go out the\nwindow. In the average Leap Year, stocks start out slow, and actually shed\n-1.3% of value in April and May. But then they, um, leap. We get 2.4%\ngrowth in June. 3.2% in July. A ridiculous 4.75% in August. And\nthen positive growth for the rest of the year (including in the normal loser\nmonth, September). The average month in a Leap Year shows an average\nreturn of over 1.33%. <\/p>\n\n\n\n
In other words, Leap Years, on average, start out slower but\nthen leap over the growth rate of Average Years. <\/p>\n\n\n\n
How can this be? (Hint: it’s got nothing to do with February\n29.) <\/p>\n\n\n\n
Keep in mind that Leap Years are also Election Years. (Oh\nno.)<\/p>\n\n\n\n
And sitting politicians like to leap into their next terms.\n(They wouldn’t!)<\/p>\n\n\n\n
The Stock Trader’s Almanac explains, in an article subtly\ntitled, “How the Government Manipulates the Economy to Stay in\nPower,” in the average Leap Year, the Fed tends to stimulate the economy\nright before elections. So voters go to the polls feeling flush. So they\nmight suddenly forget any pains of the last term. Which, of course, favors\nincumbent politicians. And which, of course, piles up more deficit which\nhas to be dealt with in the next term. (But that’s OK, politicians have\nuntil the next Leap Year to deal with it, at which point they buy the voters\noff again.)<\/p>\n\n\n\n
Now, will this Leap Year be any different? We’ve already\npiled up a lot of debt over the past 3 years (where have you gone Grover\nNorquist?). And just yesterday Goldman Sachs projected that the Corona virus\nwill cause the economy to flatline through 2020. So can we expect that this\nyear politicians will forego their normal tendency to buy off the electorate?<\/p>\n\n\n\n
Well, consider this. Going back to World War 2, only twice\nhas the S&P been in the red at the end of a Leap Year. And in both cases –\n2008 and 2000 – the incumbent party lost control of the White House. <\/p>\n\n\n\n
And now consider this. The Chair of the Federal Reserve,\nJerome Powell, has been in his position for just over 2 years. Last summer,\nwhen he raised interest rates to slow the economy, Mr. Trump called the move\n“insane” and loudly complained, “Here’s a guy, nobody ever heard\nof him before. And now, I made him, and he wants to show how tough he is …\nHe’s not doing a good job.”<\/p>\n\n\n\n
So here we go. Do you think the White House might start\napplying pressure on the Fed to stimulate the economy?<\/p>\n\n\n\n
Or will Mr. Powell be left alone to impartially do his job\nin this time of crisis?<\/p>\n\n\n\n
(Believing THAT would take a real leap of faith.)<\/p>\n","protected":false},"excerpt":{"rendered":"What happens when the economy gets a virus? If you look at the growth of the S&P 500 going back to 1926, you’ll find an interesting recurring pattern through the months of an Average Year. Almost all months show a positive return on investment, with the average month seeing an average…\n","protected":false},"author":2,"featured_media":1611,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[386,1741,1173],"class_list":["post-1610","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-elections","tag-jerome-powell","tag-stock-market"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/quicksilverhg.com\/thequicksliver\/wp-content\/uploads\/2020\/02\/Leap-Months.png?fit=907%2C388&ssl=1","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/posts\/1610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/comments?post=1610"}],"version-history":[{"count":1,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/posts\/1610\/revisions"}],"predecessor-version":[{"id":1612,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/posts\/1610\/revisions\/1612"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/media\/1611"}],"wp:attachment":[{"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/media?parent=1610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/categories?post=1610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quicksilverhg.com\/thequicksliver\/wp-json\/wp\/v2\/tags?post=1610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}