Can The Stock Market Avoid Election Year Dip?

If the last three election years are any indication, the history of the three-month period of August, September and October usually being a downer doesn't go away just because it's an election year.

Perhaps ominously, this year the market is following a similar pattern to the election year of 2000, the year of the bitter George Bush Jr./Al Gore election. There was a sell-off from April to an early June low. That was followed by a similar summer rally that carried the market all the way back to the April high by the end of August. The Dow then plunged 15% to its October low. The Nasdaq plunged 27% to its October low, and 38% to another low in November.

This year so far it's a similar pattern.

In 2004, as the George Bush Jr./John Kerry election approached, the Dow fell only 4.5% from its August high to its October low.

But in 2008, as the contentious Obama/McCain election year played out, the market again topped out in late April to a June low. Its summer rally again ended in late August, and the Dow plunged 35% to its low in November, while the Nasdaq plunged 46%.

The pattern this year is also similar to last year, a non-election year but a year when markets also awaited a hoped for rescue by the Fed and ECB.

There is another similarity this year to elections since 2000.

Neither side shows any indication of meeting in the middle after the election to try to resolve the serious problems the nation faces, including the 'fiscal cliff' that looms early next year.

The old-fashioned idea of democracy meaning that elections are held, the majority wins, and then both sides pretty much pull together and work for the good of the country until the next election, went away in the late 1990's, replaced by the pre-election differences continuing and becoming even more bitter and divisive in the years after elections.

I don't know if that's why the pattern of election years usually being positive for markets changed so dramatically with the 2000 election, but I think the widening political divide between left and right accounts for much of the going-nowhere difficulty the country has had since.

That's particularly troublesome given that the Federal Reserve has been saying this year that it can only do so much from the monetary side, that Congress must now step up from the fiscal side, a view Fed Chairman Bernanke reiterated in his Jackson Hole speech Friday morning.

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The Stock Market: Tips to Stay on Top

Everyone wants to succeed in the stock market, but few really know what attributes help to create a successful trader. This article is packed with useful advice that will help you to make the most of your abilities.

1) Follow your own intuition first. While taking advice from others is always a good idea, remember to have a strong firm mind of your own. Always go with your instincts when thinking of investing in the stock market. Listening to your own thoughts about your own considered and well researched choices can be the best advice.

2) If you are holding some common stock, you need to exercise your right to vote as a shareholder in the company. You should review the company's charter, you could have voting rights with respect to making significant changes in the company, or other. You may vote in person at the annual shareholders' meeting or by proxy, either online or by mail.

3) Take the time to research companies and stock before you invest your money in them. After researching and determining potential many people then decide to invest. If the company fails to perform to expectations, stockholders are left taking the loss.

4) Even if you select your stocks by yourself, it doesn't hurt to see an investment adviser. A financial counselor doesn't just tell you what the best investments are. They will invest time in working with you and your goals. You two can create and manage a plan that works great for you.

5) During stock evaluation, keep in mind things you use regularly. Trust your gut. Once you have looked at and approved of their balance sheet, and it seems that they are honest, think of whether or not you would use that company's item. If you wouldn't, it may not be worth investing in. You might not be able to judge the investment's value if the company offers products and services that don't interest you.

6) A good way of saving money when making investments is by trading stocks online. There are many online firms that trade stocks and are much cheaper than a regular brokerage firm. Just take your time and shop around so that you can know you have found the best deal. TradeKing and Fidelity are a couple of good, solid choices.

7) Cash isn't always profit. All financial activities require good cash flow, and stock portfolios are no different. It's crucial to reinvest and keep money on hand for bills and day to day needs. A good rule of thumb is to have six months worth of living expenses squirreled away somewhere.

8) You need to avoid getting greedy when making sound decisions about trading stocks. This is the way a lot of investors end up losing lots of money. After making a good profit, sell stocks and take any money.

Start investing now that you know the way to play the stock market! Be adaptive with your strategies to ensure success, and stick with what works to establish an impressive portfolio you will be proud to show off. Stand out in the crowd by being a high earner!

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