2013 Guesses About Retirement Investments

As we ease into 2013, it seems just about everyone has ideas — predictions, if you will — about what the new year will bring. Bearing mind that your speculation is as good as mine and that “past performance is no guarantee of future returns,” here are some of the headline-making 2103 guesses about retirement investments.

2013 guesses about retirement investments. What will happen to your money this year?

2013 guesses about retirement investments

One thing is pretty certain: since the Great Recession, the stock market has managed to claw it’s way back to record levels. It also looks like things will continue to get better.

Optimism about the economy and the political scene brought strong gains for the stock market in 2012, despite occasional jitters over the so-called fiscal cliff. There are reasons to think the rally will continue through 2013. Europe is getting better. China is stronger. Maybe our own economy will pick up as unemployment goes down, consumers build confidence, and politicians agree to compromise.

That said, we can safely bet that diversity in your investment portfolio is a good thing, because — let’s face it — no one really knows what the future holds for China, Europe or anywhere else in the world and you want to be prepared. Then there’s the infamous “presidential cycle.”

Research tells us that the stock market tends to follow a presidential cycle. Stock prices go up during a presidential election year like 2012 by an average of about 8 percent. This past election year brought us almost twice that, some 15 percent.

Marshall Nickles of Pepperdine University suggests

…while the presidential cycle theory is historically accurate, it does not necessarily predict stock prices. The market is subject to various forces, many of them unforeseeable, and a recognized pattern may not anticipate the next turn in the market.

A report from John Hancock Mutual Funds confirms

…the observation that the stock market ekes out small gains during a president’s first two years, then goes gangbusters during the president’s second two years. John Hancock puts the chances of a stock-market gain during a presidential election year at 74 percent. But the chances of a gain during the first year of a presidential term fall to 57 percent. And this study calculates an average return of just 4 percent.

Then there’s the Santa Clause rally.

Yale Hirsch of The Stock Trader’s Almanac looked at the last five trading days of the year plus the first two of the new year. Since 1950, those seven days have averaged a 1.5 percent gain in stock prices (an annualized rate of over 50 percent). He also found that this Santa Claus rally often predicts the next year’s market. If the Santa Claus rally arrives on schedule, it’s a good sign. If it doesn’t, then the following year often turns bearish.

Ho! Ho! Ho! You may find it entertaining to look at the numbers, trends and predictions — I do — but don’t bet the farm on them. Instead, remember that they’re 2013 guesses about retirement investments.

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