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Buy in November, Six Months to Remember

These are the U.S. stock market's best six months of the year. You may have heard the old adage, "Sell in May and Go Away", but how about "Buy in November, Six Months to Remember"

Even Wyclef Jean realised you work the summer months then let your money work for you from November to April.

"Every time I make a run, girl, you turn around and cry
I ask myself why, oh why
See, you must understand, I can't work a 9 to 5
So I'll be gone 'til November"

The Money Pouch's Momentum Investment Strategies

All of our strategies have been up in 3 of the last 4 months and we are starting to get into the "money making season" for the U.S. stock market. September is looking pretty flat, which is expected for this time of the year. But, November, December, January, February, March and April are historically the best months of the year for the U.S. stock market and I don't see any major reasons why US equities won't perform well despite high valuations, except in a "Black Swan" event.

The US Stock Market Looks Strong

The economic conditions look OK in the US. Unemployment is steady at around 4%, see the chart below from the Bureau or Labour of Statistics (BLS). 

 

Consumer sentiment is at the highest rate iit's been in 13 years and consumer sentiment is also high. Business sentiment is also up 20% and you can see in these charts, in recessions, business sentiment falls to below 0%. 

Inflation expectations are stable and low at around 3%.

Eating out, retail restauarant sales is also particularly strong. The Dynamic Food & Beverage ETF is holding steady and the leisure & entertainment ETF is doing well. 

Yes, stock valuations are high, by most indicators including the Shiller PE Ratio and Tobin's Q.

However, in the business cycle, the market is looking healthy and with the 4th industrial revolution with new technology and blokchain reducing costs for companies, it looks positive from the point of view of the U.S. stock market.

So, what are the negative indicators?

1. Credit crunch - Whilst we are in a good stage of the business cycle, it is in the downturn of the credit cycle as Edward Harrison points out in this excellent article. Credit is tightening and Quantative Tightening (QT) is coming into effect, meaning US interest rates are rising and the US government is reducing their purchases of bonds.
2. Housing - Interest rates are rising which means that mortgages are becoming more expensive. US house prices are also very high. 
3. Trump's Trade war with China - This obviously has a negative effect on the economy and US exports. Future policy and increased tariffs will have a negative effect on the markets.
4. Real Economy - whilst the US stock market is looking strong, the actual economy is looking weak with the labour force participation rate not recovering as jobs are lost overseas.
5. US Household Debt - This is now at over $13 trillion with ongoing growth in home, auto, student and credit loans, although delinquency rates are stabilising.
6. Black swan event - Something unforeseen. 

Where Not to Invest

Emerging markets are taking a hit from the trade war fall out with China and high interest rates in USD. Most emerging markets own US treasuries, so when US interest rates go up, their government debt, which is in USD, also goes up and their currencies & stock markets weaken.

Best Six Months of the Year for US Equities

Investing in US equities between November 1st and April 30th each year and then switching into fixed income for the other six months of the year has produced reliable returns with reduced risk since 1950.

Yes, this is a 68 year old proven method!  If you back test this strategy since 1950 with an initial investment of $10,000 in the DOW, you would have had gains of 6,740%!

How to Invest Successfully on Auto Pilot with The Money Pouch

We actually improve on these returns using various methods, such as momentum, adding foreign stocks, bond ETFs, gold ETFs and the ability to sit in cash.

Our opinions don't really matter though, the strategies will automatically reallocate to where the hot money flows are, whether that is to be in US equities, in bonds, gold or cash. That is the beauty of momentum strategies. 

Your investment portfolio will automatically be hedged and rebalanced usually once per month. 

Click here to see the historical performance of our investment strategies and the new momentum ETF strategies.

Our strategies are now available in most countries worldwide in USD, GBP and EUR. Please click here for a list of countries we accept.