Second Half of the Year: Portfolio CheckUps, The Congressional Effect and Markets Going Forward

Welcome to 2009 part two. Now’s a good time to look back over the first half of 2009 and see how far we’ve come – economically, fiscally, personally.  In the past I’ve done portfolio checkups just once a year, but this year I’m starting mid-year checkups as well.  I check in regularly throughout the year, of course, but by a check-up, I mean, sitting down and writing out all the numbers, doing my cashflow sheets, and evaluating whether I’m on target to meet my financial goals for the year.  I can say yet again, that just like January 2009, I’m a bit behind due to this whopper of an economic hit we all took.

The Congressional Effect – How High Will Markets Go In August?

In more exciting news, I’ve learned this week about something called The Congressional Effect.  I’ve written about seasonal investing before and to some extent, this strategy falls into that category.  Basically the guidance is that when U.S. congress is out for the season, the stock markets tend to do exceptionally well.  Jeremy from Generation X Finance pointed this out this week on Twitter.  “90% of the capital gains over the life of the DJIA come when Congress is out of session. Time to buy? http://bit.ly/dNRd3“

According to research done by professors at the University of Cincinnati and Missouri, cited in Mark Hulbert’s report for MarketWatch, “This actually makes a certain amount of sense… Companies and investors face “a more uncertain tax and regulatory environment” when Congress is in session. As confirmation of this finding, the professors point out that the stock market has tended to exhibit significantly greater volatility when Congress is meeting. And volatility is a good proxy for uncertainty.

To be sure, the Congressional Effect hasn’t always prevailed: Stocks have not always performed well when Congress is on recess, just as they have not always produced poor returns when Congress is meeting. In trying to assess why it hasn’t always worked, the professors found that the pattern has tended to be strongest when Congress has a low approval rating in public opinion polls.”

Well, Congress just broke for recess yesterday, July 31, and won’t be back in session until Labor Day in September.  That means August could shape up to be a great month for stocks – so let’s see what happens.  The DOW closed July 31 at 9,171.

I’ll leave you with some related reading from some of my fellow finance bloggers.  Hope you have a great weekend!  Make sure you get the most out of the season and push hard through your priorities – life is short, so start with what’s really important!

Ultimate list of all U.S. bank closures in 2009 (and counting!) – Sun’s Financial Diary
What We Wish We Knew When We Were Younger – Get Rich Slowly
Great Stock Market Performance, But Will DOW 9200 Hold? – The Digerati Life
Why I’ll NEVER Get Another 30-yr Mortgage – Debt Kid
Is Your Financial Advisor Worth $600/hr? – Thicken My Wallet
Buying A Car From the U.S. – Pros/Cons and the Process – Million Dollar Journey

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• Seasonal Investing ETF and Seasonal Investing Strategies from Brooke Thackray
• Seasonal Investing Rule #1: How To Use the January Effect To Your Advantage
• Five Simple Ways To Help Make Sure You Buy Stocks Low and Sell Them Higher
• Will We Still Be Investing in 2110, and What Will Markets Look Like in 100 yrs?
• Cashing in On Chips, Candy and Costumes: 10 Sweet Stocks For Hallowe'en

• Where Would You Put Money Now?
• Financial Goals for 2009 (part 3)
• Automatic rebalancing or not?
• 401k Introduction
• Pay Off Mortgage Early?

Tagged as: congressional effect, link roundup, portfolio checkup, seasonal investing