Some upbeat economic news……
Last Monday the Dow tumbled 180 points, in spite of some upbeat economic news. So why, if the news was good, did the market take such a hit? Well some “experts” would tell you it was simply because it was the first day of September. You see September suffers from the reputation of having been the worst month of the year for stock markets past. The average return for U.S. equities for the ninth month (the only month in fact to have a negative average return) has been a minus 1+%. The market has only posted gains in 34% of all the Septembers since 1954.
I’ve had a handful of clients recently inquire as to whether they should bail out of the market just for the month, to catch the for sure drop that comes every September. I’m serious, “the for sure drop that comes every September”. While a 66% probability is worth noting, it’s just a wee bit shy of “for sure”, don’t you think? I mean, that’s about how well Shaq did at the free throw line last year. And I assure you, when he stepped to the stripe, nobody on the planet was thinking ‘oh yeah, he’s ‘for sure’ gonna make it’.
Now for all I know this shleprock of months may very well bring that 10% correction everyone’s been calling for (since about June by the way), just because it’s September. After all, that has to be why the market dumped the first day of the month, in the midst of good economic news, right? Well maybe, but September also happens to mark the last month of many mutual funds’ fiscal year end, and it appears that there may have been a considerable amount of tax loss selling going on to offset some of this year’s realized gains (keeping funds from having to make taxable distributions to their still shell-shocked shareholders).
Yesterday evening Bloomberg Television aired a special subtitled “Predicting the Future”. The program featured a half dozen or so brainiac second-guessers who waded in on everything from where the economy’s headed to whether Ben Bernanke deserves reappointment. And as you might imagine the prognostications were all over the board. As I’ve suggested here before, when you gather together a group of similarly credentialed individuals, with off the chart IQs, who you know going in won’t agree on the very topics they each advertise their expertise in, what you get is an amazing display of personalities, egos if you will. And you come out less sure of anything financial than you were going in.
So for those of you who absolutely must know the future, there’s no need to catch the re-run of last night’s show. I’ll give you the most accurate forecast you’ll find anywhere. This is the one you can count on, and you can quote me on this all day long. Here goes:
“The market will indeed experience a 10% correction. There is indeed a raging bull market in our future. There is indeed a nightmarish bear market in our future. There is another recession coming. There is another expansion coming. The party in the majority in Washington will not always be in the majority. If we head in the wrong direction, we’ll change direction. You will see negatives on your brokerage statements. You will see positives on your brokerage statements. More crooks will get caught. More honest businesswomen and men will get filthy rich. More banks will fail, even more will survive. Interest rates will go up. Interest rates will go down. Inflation is coming. Deflation is coming. Unemployment will get worse. Unemployment will get better. Your home’s value will rise. Your home’s value will fall.”
The very bottom line is this: Free-Market Capitalism in America, in the end, will reign supreme. It’s the system that works!
Yours’ and our chief concern has nothing to do with the timing of all that I assure you will come; it has everything to do with making sure your portfolio’s allocation is consistent with your objectives, your time horizon and, above all, with what your nervous system can ultimately withstand.
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