Bear markets are bad for your health

Duke research shows link between stock slides and heart attacks ... and a footnote in the data offers a hidden investing tip!

By InvestorPlace Mar 16, 2010 7:12AM

stock adviceGives a new meaning to "crash carts," doesn’t it?


According to a recent study at Duke University, there is a correlation between heart attacks and bad days for the market. That seems logical, considering the stress a bear market can cause.


Researchers say there is enough evidence to make the link noteworthy. But what you may find more interesting is a footnote to the study that highlights a much more practical correlation with market declines. In fact, it’s one that investors can actually put to use in their portfolios instead of their medical charts.


You see, Duke researchers themselves admitted that seasonality had as much to do with the data as the fluctuations in the market. The link between heart attacks and bad days for the Dow weakened after a second analysis taking into account seasons of the year. Some research suggests heart attacks are more common in winter, meaning the initial finding could have been a statistical fluke.

This footnote in the data should be a massive headline for investors: The time of year matters -- with your health and with the stock market!


The seasonal strength of the market has long been documented – and reflected in the old adage “sell in May and go away.” That’s because the market typically performs best from after Thanksgiving through New Year’s and into the spring. Then, come the lazy days of summer, stocks roll back once more.


There are plenty of proposed reasons for the phenomenon. Some think holiday spending and general optimism tends to lift the market at the end of the year. Others claim a spike in volume fueled by year-end pension and fourth-quarter earnings lifts the market in the first few months of a New Year. Yet another theory is that tax-sensitive investors do most of their trading around the first of the year in an effort to minimize tax exposure.


Whatever the reasons or combination of reasons, this seasonal strength is hard to argue with. A recent study of historical S&P 500 data bears this out – with 8.5% returns from 1950 to 2007 when investing in the winter and spring compared to gains of 3.2% in the summer and fall period.


We may be approaching the low-risk time of year for heart attacks, but we are approaching the high-risk time of year for stocks. So take notice! You’ve got about six weeks before the seasonal winds change course, so invest wisely.


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