Dear Friends and Family,

Sixty-six years of midterm elections. Since 1962 in every bi-election year the stock market has had a negative return from January 1st till election day. There were different issues, different parties in power, different world situations, successes and failures but still the markets were down. There were explanations, but none seem logical because the presidential election years do not fit the same pattern. Perhaps in the bi-election year, we are pessimists that the elected president did not live up to expectations, and in the presidential election year we are optimists about the possibility of change.

In all cases the stock market in the one-year period following bi-election day, always had a positive return. Both the declines and advances were substantial. The smallest decline was 7%. The smallest advance was 9%.

The largest decline was 38%. The largest advance was 58%.

The average decline was 19%. The average advance was 31%.

This year is interesting. The market return was negative for the year and turned slightly positive the day before the election. First positive year since 1958. Despite all the discomfort of a very volatile year we are back where we started.

I would suggest that the out-performance in the years after bi-elections is due to the market returning to the mean after the underperformance the prior year. Will this happen in 2019? I do not know. History suggests that investing in high quality securities out performs guessing on future market moves. It is also comforting to know that 80% of years are positive and the declines in bad years lead to exception gains in the following years.

Charitable giving in the new tax environment – Giving your RMD (required minimum distribution) directly to a charity is one way to provide funds to your favorite charity and save on taxes. In this case, your RMD is not considered taxable income, therefore this is great solution that allows one to donate to a charity while receiving tax benefits. Please contact your charity and notify Aly if you would like to do this. Remember it must go directly to the charity from your IRA account.

Katz Family Financial