What causes the “Income Tax Bounce”?
How about tens of millions of investors who need to raise the cash to make an income tax payment on April 15th… That money is pulled out of their investment accounts and that means the stock market and other wealth repositories will be drained of a significant percent of cash. Also the indecision and general mental strife that goes along with writing that big check tends to keep people away from the markets. Volume goes down and what volume there is tends to be selling so, in general, stocks go down right through the April 15th deadline. Then… As investors recover from the tax payment cash drain and some even find they pulled out more money than they needed, investors wade back into the market and stocks start to recover. This combined with last minute IRA checks that flood in on April 15th should increase overall buying volume. The Iraq situation appears to be magnifying this effect. Especially if you believe US forces will be past their current roadblocks on the way to Baghdad by
