Tax Alert: Your Weekly Update - Home Sales Make 8 Year High

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Weekly Market Recap

US housing sales made an 8 year high for April, with strength across most regions of the country. Housing data has historically been volatile month to month. Nonetheless, this strongly positive news on housing appears to be a positive for the US economy, especially for consumers and the financial sector. In contrast, surveys on manufacturing activity for May were relatively soft, though still positive, in both the US and Europe.

As November's US elections approach, you may be wondering about the implications for the financial markets. In the US, we believe the most robust finding is that stock market performance has historically been better in the second half of a Presidential four year term relative to the first half. However, it has been historically positive, on average, over both halves of the Presidential term.

Also, as one might expect, immediately before elections, market volatility has historically been high. This means that portfolios may experience higher volatility this November, though we do not expect this to have long term impact, once the outcome of the election is known.

Of less overall significance in our view, the US markets have historically performed slightly better under Democratic Presidents and at times of divided government. Importantly further statistical analysis and international comparison suggests that these factors are more likely based on chance rather than being fundamental drivers of stock market returns.

Once again, these findings on elections and the market lead us to the conclusion that the appropriate strategy for the investor is to maintain a disciplined long term focus, rather than to attempt to predict short-term market direction. Such predictions have the potential to lead to higher trading and tax costs, without clear promise of superior performance.

Notes:
New Home Sales Data
https://www.census.gov/construction/nrs/pdf/newressales.pdf
Stock Market Returns and the Presidential Cycle
http://www.jstor.org/stable/4479536?seq=1#page_scan_tab_contents
Elections And Stock Market Volatility
http://www.sciencedirect.com/science/article/pii/S0378426607004219
Further Reading On Elections And The Stock Market
https://www.blackrock.com/investing/literature/whitepaper/political-outlook-market-perspectives-january-2016.pdf?cid=blog:marketperspectives:blackrockblog:russ

Disclaimer:
The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by FutureAdvisor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic political conditions, and as subsequent conditions vary. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions and market conditions prevailing at the time of investment may lead to different results. This material may contain "forward-looking statements": information that is not purely historical in nature. Clients may lose money. Past performance is not indicative of future results. Investments in securities involve the risk of loss. Any tax strategies discussed should not be interpreted as tax advice and do not represent in any manner that the tax consequences detailed will be obtained. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

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