Money stack bow

Content provided by Kostya Etus, CLS Research Analyst

It’s that time of year again. People forget about their problems and rejoice by getting together with friends and family, dressing up in costumes, eating turkey, and most importantly, spending large amounts of money on presents. It’s the HOLIDAYS!

With this large inflow of money into businesses, one would think it would be beneficial for the markets. But is there any data to back this up? According to Morgan Stanley research, over the last 50 years, total returns for the S&P 500 were the highest in the fourth quarter, at just over 3.5 percent. In addition, fourth quarter performance was largely independent of the returns in the first three quarters, so the 20 percent year-to-date return should not, by itself, be an impediment to a strong finish this year.

If you believe that this year’s political and economic developments have made 2013 more volatile than recent years, here are a few points that may help you relax and ease into the holiday spirit:

  • Economic data is not pointing to the initiation of tapering in 2013. Morgan Stanley sees the most likely opportunity for a start in tapering all the way out to March of 2014.
  • Debt ceiling debates have subsided and the government shutdown has ended, no need to worry about these issues until next year.

About 30 percent of S&P 500’s market cap has reported earnings and the aggregate earnings are 4 percent ahead of expectations. Financials are leading the earnings, but technology and healthcare have also had exceptional reported numbers.