Wyatt Research Week in Review: April 10-16

While preparing to write this week’s missive, I happened to catch a few minutes of the Democratic presidential primary debate between Hillary Clinton and Bernie Sanders. It was a more pugnacious affair than the previous sparring contests between the former secretary of state and current Vermont senator, though it was nothing compared with the verbal slugfests of the primary season Republican brouhahas.
But don’t worry, I’m not going to wax political. I don’t want to know whom you voted for (or plan to vote for) wherever you call home, and I won’t tell you whom I voted for in the Vermont primary.
I bring this bit of politics up because the debate reminded me of a passage I happened upon in the “Stock Trader’s Almanac” earlier this year regarding the moribund state of the market during election years that coincide with the eighth year of a sitting president’s term.
“Eighth years of presidential terms represent the worst election years since 1920,” the almanac states. “In eighth years, (the Dow Jones Industrial Average) and S&P 500 have suffered declines of -13.9% and -10.9% respectively. Out of these six full years (1920, 1940, 1960, 1988, 2000 and 2008), only 1988 was positive.”
That said, the almanac also reminds us that election years are traditionally up years – particularly during the back half of the year. Since 1952, January through April losses occurred in 8 of 16 election years, yet the last eight calendar months have seen losses in only three of those 16 years (1956, 2000 and 2008).
It should also be noted that 2000 was the year the dot-com bubble burst and 2008 was the height of the subprime mortgage crisis and Great Recession.
As of Friday’s market close, the S&P 500 was up 1.8% for the year. This comes despite a miserable month of January, when the broad-based index dropped 5.1%.
As I wrote in this space earlier this year, the almanac’s vaunted “January Barometer” states that as the S&P 500 goes in January, so goes the year. The market indicator has registered only eight major errors since 1950, which works out to an 87.7% accuracy ratio. However, I’d be remiss if I didn’t mention that one of those errors occurred in 2014, when the S&P 500 lost 3.6% in January but finished the year up 11.4%.
So like the presidential primary races, the early returns are telling, but there’s still a fighting chance that the market could mount a come-from-behind victory in 2016.
Here are some of my favorite Wyatt Investment Research articles from the past week:
Avoid the Tax Inversion Confusion With These Health Care Dividend Stocks – The Treasury Department has long had tax inversion deals in its cross hairs. Now it’s getting more aggressive than ever, with the recent rollout of sweeping regulations aimed at reducing the number of corporate tax inversion deals and associated earnings stripping practices. But two health care dividend stocks are offering solid payouts – and unlike Pfizer (NYSE: PFE) and Allergan PLC (NYSE: AGN), they won’t get caught in the tax inversion crossfire.
Fixed-Income Investors Zero In on STRIPS – One of the hottest investments of 2016 has been a subset of the $13.2 trillion U.S. Treasurys market many fixed-income investors wouldn’t even consider.
Place Your Bets With This Sports Entertainment Stock – The best sports entertainment stock is bloodied but not bowed and is ready to lay the smack down.
Why STAG’s High-Yield Dividend Has Income Investors Partying – Though the name is rather randy, STAG Industrial’s (NYSE: STAG) business is quite staid and pedestrian. STAG is an industrial real estate investment trust that owns 291 properties spread across 38 states. The majority of its properties are composed of warehouses and distribution centers. Yet since its 2011 initial public offering, STAG has increased its dividend at a 6% average annual rate.
It’s Time to Press Play on This Video Game Stock – Shares of this video game stock are down 28% in the past year, as investors are increasingly worried about the future of physical video games. But at a certain point, a beaten-down stock becomes too cheap. That appears to be the case here.
Brazilian Markets Samba as Pressure on Rousseff Grows – After a brutal latter half of 2015, Brazilian markets have been dancing higher as a possible impeachment of President Dilma Rousseff grows nearer. Brazil’s problems will not go away overnight. But for patient investors willing to build positions slowly, a few choice Brazilian investments are enticing.
A $1.6 Billion Bet on the Mexican Auto Market – Buoyed by a booming auto sector, Mexico could soon upset the BRIC acronym and supplant Brazil or Russia among the world’s premier emerging markets. And one U.S. automaker is betting big on small cars continuing to increase in popularity south of the border.
Why Verizon Should Buy Yahoo – Verizon (NYSE: VZ), one of the nation’s largest wireless carriers, has been quietly gearing up for its next big move in its aim to become a media giant. Yahoo (NASDAQ: YHOO) might hold the answers, as Verizon is reportedly working on a bid for Yahoo’s Web business.
Have a great weekend!