This could play into December market action in a meaningful way as investors will position themselves for 2013 based on the likely changes in investment tax laws (via Goldman Sachs, courtesy of BI):
“We expect both rates to rise in 2013 but the election outcome will determine details,” they write.
That [capital gains tax] increase would be similar in magnitude to the 9 pp rise starting in 1970 and the 8 pp rise in 1987. In both cases the S&P 500 posted negative returns in the December prior to implementation as investors locked-in the lower rate. The market fell 1.9% in Dec-69 and 2.8% in Dec-86 running counter to trend as December has the second highest average monthly return (1.5%) and a 75% hit rate since 1928.
Source: Business Insider
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.