Welcome to October!
Welcome to October
Stock market volatility is way up, stocks are swinging wildly, and headline news are pessimistic. Welcome to October.
It feels like we go through this every year. Crazy markets in September, and October, and then a strong 4th quarter. Of course, last year was the exception with a terrible stock market performance, but that was an anomaly.
That makes me even more optimistic that this Q4 will be good, and not just from a hope and a prayer. We have history on our side.
According to a CNBC analysis of Kensho, a market data analysis platform, over the past decade the S&P 500 has averaged a 4% gain in the final three months of the year. The S&P 500 had traded positively 80% of the time. The Dow Jones Industrial Average had added 5% in the fourth quarter over the past 10 years, trading positive 80% of the time.
Over the past three decades, the 4th quarter has been quite good with the Dow Jones +4.3%, S&P +3.6%, and Nasdaq +4.7%, according to Kensho, and trade positive 75%–80% of the time.
So why the volatility and negative investor sentiment? We are now witnessing the slowdown that the market was expecting last December, with those huge selloffs. Stocks predict the economy 6-12 months in advance. Not what’s going on today.
This past week we saw the ISM manufacturing number come in much lower than expected. The trade tariffs have much to do with that. However, this does not mean we are headed for a massive recession where the stock market gets killed.
To the contrary, the strong gain we have seen this year is the market looking out again 6-12 months, past this slowdown, predicting a quick recovery. Do not underestimate the global desire to spur economic growth with the new flush of liquidity. However, betting against that could be the mistake of a lifetime.
In addition, we are also in the pre-earnings nap period. The blackout period before earnings are announced, were the only negative news we got from the front pages.
Word to the wise. Do not get too caught up with the wild swings and pessimistic news, convincing yourself that these gloomy headlines are worse than all the others we have seen and overcome. I understand that new fresh news hurts more because, well because it’s in your face now. Worse yet, do not sell into a frenzy when it is not warranted, and then must buy back at higher prices.
Once earnings start to be released in a couple of weeks, if they are better than predicted which I expect, the market will resume its uptrend and we will see new highs later in the quarter. However, if there is danger on the horizon. Rest assured we will take decisive action to protect your portfolio.
If you have any comments or questions, or simply would like a free review of your portfolio or overall master retirement plan, just give us a call for a free no-obligation consultation today!
Invest for need, not for greed!™