Seasonal Investing: Congressional Effect
Here is an article from CBS Marketwatch on yet another seasonal investing idea, "Congressional Effect".
The stock market dislikes uncertainty. Whether it is a company about to report earnings, a worldly event about to happen half-way around the world, or the government about to pass a law, the stock market treats them all the same...with a lot of volatility.
And, in general, volatility is bad because the stock market has to discount for the uncertainty. In another words, investors are going to demand a risk premium for the risk associated with the uncertainty.
So, in the case of the Congressional Effect, it would seem to make sense that whenever Congress is in session and has the potential to pass regulations, there is one additional factor of uncertainty for investors to deal with.
Now, having said that, I would not jump-in or jump-out of the stock market solely on the basis of the Congressional Effect. It should be used as just another factor in the overall decision.
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