Isn't Investing Less Scary When Viewed on a 4-Year Cycle?
Next year marks the year of the U.S. presidential election.
Based on past trends, global indexes tend to be cheap in this year.
Below is a graph illustrating the lows of the S&P 500 index during U.S. presidential election years since 1980, represented by the green dashed lines on a white background.
This trend holds true for all cycles except from 2000 to 2003.
Incidentally, according to the Stock Trader's Almanac, the stock market performs best in the year following the midterm elections. Take a look at the orange dashed lines present in the graph above.
Next year, 2024, is also a leap year and coincides with the halving of Bitcoin miner rewards.
Let us briefly go through this monetary policy of the Bitcoin network, also known as the halving event.
It is a mechanism to control the supply of Bitcoin to the market, which occurs in a 4-year cycle.
Just after Bitcoin's inception in 2009, the miner reward per block was 50 BTC.
That miner reward halved to 25 BTC in 2012, 12.5 BTC in 2016, and 6.25 BTC in 2020.
If mining continues at the current pace, it is expected that the miner reward per block will halve to 3.125 BTC around April of next year.
If the supply pace of Bitcoin decreases through the halving event and demand remains consistent, upward pressure on Bitcoin prices is anticipated after the 2024 halving event.
Most cryptocurrencies allow access to information equivalent to a 'public ledger,' which helps gauge this demand.
To get a sense of Bitcoin's demand, this graph represents the Bitcoin price and the number of addresses involved in transactions on the Bitcoin network. The gray vertical lines indicate when the latest two halving events occurred.
Returning to U.S. stocks, if you are aiming for a varied stock market portfolio, the MSCI All Country World Index offers global exposure. But if higher risk is acceptable to you, think about a more targeted market like the NASDAQ ETF.
If your goal is to find individual stocks that are relatively less volatile and offer income gain, how about looking into the companies in the Dow Jones Industrial Average?
Or, if you're optimistic about cryptocurrencies but prefer the traditional finance route, an investment in a company that earns from crypto trading fees, such as Coinbase on the NASDAQ market, might be right for you.
Finally, if we apply past trends to the next presidential election year, for instance, one approach might be to use dollar-cost averaging to purchase global equities such as the ACWI throughout the next year and hold them until the fourth year following the presidential election, then DCA out.
Remember: It's more challenging for average investors like us to judge the long-term prospects of assets with smaller market caps. Assets that spike in value can also crash just as hard.
Disclaimer: My post is not financial advice.
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