The same will happen to this Tax Day effect but perhaps not for another year or two.
From MoneyBeat:
The closer we get to April 15, the more jittery markets are likely to become.
With most investors facing higher tax bills this year, their financial advisers are being tasked with helping them come up with the needed cash to pay substantial capital gains, or taxable income from the sale of investments held longer than a year.
As we noted earlier this week, that could translate into added selling pressure in the markets ahead of the April 15 deadline to file tax returns, market watchers say.
“Many investors in the U.S. are looking at the next week with a sense of dread as tax deadlines loom and, for many, that includes a payment owed to the government for services rendered,” said Jason Goepfert, founder of Sundial Capital Research and author of the SentimenTrader Daily Report. “It could be especially bitter this year due to a combination of gang-buster markets in 2013 and increased tax rates.”
Here’s a look at the stock market’s performance around previous April 15 deadlines during the current bull market.
- SentimenTrader
Stocks dropped Thursday, giving back some of the previous day’s gains. The S&P 500 rose 1.1% Wednesday, its biggest one-day gain since March 4, as minutes from the Federal Reserve’s latest policy meeting soothed concerns that the Fed will raise interest rates sooner than some expected.
The index was flat for the month through Wednesday’s close. Looking ahead, Mr. Goepfert says the S&P 500′s performance around Tax Day is correlated to the previous year’s performance. Considering the index surged 30% in 2013, that doesn’t bode well this year.
After crunching through the historical data, he found that investors are more likely to sell around April 15 following a big up year for stocks, whereas a down year doesn’t translate into as much selling pressure.
Here’s a look at the market’s performance around Tax Day after the best-performing year.
- SentimenTrader
And a look at the same data following the worst-performing years....MORE
