As impeachment mania continues in Washington, we’ve reached the year’s fourth quarter, which means it’s time for investors to be reminded of last year’s very painful stock-market decline.

During the first three trading sessions of October, the Dow Jones Industrial Average DJIA, +0.86% declined 2.7% and the S&P 500 SPX, +0.90% was down 2.2%. You may take these declines in stride — after all, the Dow has returned 12% this year, while the S&P 500 has returned 18% (total returns include reinvested dividends). But this strong showing masks what has really been a recovery from the dismal fourth quarter of 2018.

FactSet

A 12-month chart gives a far different impression than the year-to-date gains for the benchmark indexes.

For 12 months through Oct. 3, the Dow was down 1.6%, and the S&P returned only 2.4%. This is because the indexes were down 11.8% and 13.5%, respectively, during the fourth quarter of 2018.

All this points to the utilities sector — the best performer in the S&P 500 over the past year. That may not be a surprise given the decline in interest rates, but the sector‘s performance over very long periods has been very good.

If the Federal Reserve again cuts long-term interest rates, dividend-paying utility stocks should have a fresh catalyst.

How tax-friendly is your state?

Conventional wisdom is that California is the worst state for taxes because it has the highest top income-tax rate. But that’s too simple, because the top rate only applies to the relatively small number of households with annual income of more than $1 million.

This week, the personal-finance publication Kiplinger’s released its list of the most — and least — tax-friendly states in America. To draw its conclusions, it used a hypothetical couple with two kids and $150,000 in income a year plus $10,000 in dividend income, and then looked at the income-, property- and sales-tax burden that family would face.

Illinois took the No. 1 spot on the list, thanks in large part to its high property taxes. The Land of Lincoln was followed by Connecticut and New York, both of which have pretty high-income taxes.

The 10 least tax-friendly states:

1. Illinois

2. Connecticut

3. New York

4. Wisconsin

5. New Jersey

6. Nebraska

7. Pennsylvania

8. Ohio

9. Iowa

10. Kansas

Meanwhile, the most tax-friendly states (in order) were Wyoming, Nevada and Tennessee. The first two don’t levy an income tax; Tennessee has an income tax, but it only applies to interest and dividends and not to salaries and other wages.

The 10 most tax-friendly states:

1. Wyoming

2. Nevada

3. Tennessee

4. Florida

5. Alaska

6. Washington

7. South Dakota

8. North Dakota

9. Arizona

10. New Hampshire

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