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How Does Mr. Market Tend to Perform in March?

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As they spin their spreadsheets and try to divine what now lies ahead, investment strategists assess the market’s fundamentals, technicals, valuation and fund flows. In addition, some market watchers also look to history, which they argue can serve as a useful guide for how Mr. Market tends to perform.

So, historically speaking, just how does the stock market usually do in March? According to the recent number-crunching by S&P’s Sam Stovall, it’s usually a pretty good month for stocks.

Specifically, Stovall, who serves as the chief investment strategist for Standard & Poor’s Equity Research, notes that the market, on average, has gained 1.2% in March since 1945 versus 0.65% for all 12 months, ranking it number-four behind December, April, and November. What’s more, the S&P 500 rose in price 65% of the time in March versus 59% for all 12 months.

To make matters even more encouraging, says Stovall, the S&P 500 gained an average 2.0% in March during the third year of a president’s term in office, and rose in price 81% of the time.

Yet, to be sure, these favorable results don’t rule out the possibility of a decline in March: The market did manage to fall more than 2% 10 times during all observations since WWII, and more than 10% in 1980.

Indeed, despite March’s generally favorable historical record, Stovall tells his clients that he thinks there is a good possibility that the digestion of the market’s more than 30% advance since the July 2010 correction low is now upon us.

The market watcher believes we’re due for a pullback or mild correction, although he’s not betting on a new bear market because he doesn’t believe that tensions in the Middle East will spill over into the more critical oil producers like Kuwait and Saudi Arabia
POSITION:  No positions in stocks mentioned.