"A recent study by the CFA Institute found that tweaking your investments according to the Fed's monetary policy can be highly beneficial. The stock market averaged a 12 percent annual return from 1973 through 2005. When the Fed has pursued an expansive monetary policy and lowered short-term interest rates, the stock market gained an average 17.41 percent a year. When the Fed was raising rates, the stock market gained an average of only 5.34 percent a year."
Sensei over at Stock Rake also points out a signal first identified Norman Fosback in the 1973 book Stock Market Logic called "two tumbles and a jump." According to The Most Telegraphed Big Money Signal Ever?:
"Twenty calendar days after the signal, the S&P 500 is usually up an average of 4%. According to Fosback, the average S&P gain after three months is 11%; after six months, 15.9%, and after one year, 29.7%. Fosback says the two-tumbles signal is most effective in the six-month and yearly intervals. In 18 of 19 times, returns have been positive."
Over the next two weeks, I plan to be making investments in:
- An updated stock pick list from a modified Unemotional Investor Growth system.
- Domestic and Foreign diversified stock ETFs. VWO, EFA and SPY are some that I am considering.
- Select country and sector ETFs. I have already purchased the Brazil ETF, EWZ, and the China ETF, FXI.
I will publish my specific equity purchases as they are made.
For more on New Beginnings, check back every Sunday for a new segment.
Photo Credit: morgueFile.com, Kees Huyser
This is not financial advice. Please consult a professional advisor.
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