Dear Investors,
The stock market has had an unprecedented run for the last 7 months. Normally we see a correction in May in the markets as I outlined in the last post. The chart below shows that June, July, August and September have been the worst performing months for the S&P 500 Index since 1988.
Our shorts are in place in anticipation of the usual correction. However, this is a presidential election year in the U.S. and it seems that Obama wants to get in for another term. Looking back over the last 30 years election years have historically produced positive stock market returns. Since 1972, the stock market has rallied in 5 of the 8 election years, according to J.P. Morgan, with market gains of 12-26 percent. Only during recession years (2000 and 2008) did the S&P 500 provide negative returns.
Therefore to hedge our bets I am adding a long stock position which I will likely hold until the election in November. It is common practice for portfolio managers to take a long position in the most fundamentally sound, undervalued companies with the greatest growth potential which is what I have added to our portfolio. Our short positions with a July expiry will hedge our long position and we will benefit greatly if there is a correction in May or June. If however we do not get a correction our long position will cover any losses on our short hedge. This is how the biggest hedge funds run their office. Low risk. High return.
To get access to my specific stock recommendations outlined in my posts you can subscribe to my premium stock alerts below. The investment is EUR79.95 per month.
Best Regards,
Robert McManus
Robert McManus
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