“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” ― Mark Twain, Pudd’nhead Wilson’s Calendar for 1894
Twain’s witty words of market wisdom never grow old. His choice to highlight October was prescient. October 1929, which recorded a 20% price drop in the S&P 500 Index, still lay 35 years in the future. Ninety-three years later on October 19, 1987, known as Black Monday, we saw a 20% one-day price plunge in the S&P 500 Index — and a drop of 22% for the month as a whole. And then, more than a century after Twain’s observation, the S&P 500 Index plummeted 17% in October 2008. But the cleverness of Twain’s quote is in its emphasis on October as one of the “peculiarly dangerous” investing months — among 12 equally “peculiarly dangerous” months. As it turns out, despite a few notable October declines, it is not the worst month to be in stocks. According to data supplied by Yardeni Research Inc., September is by far the worst performer, on average, followed by May and February (Exhibit 1). October turns out to be a middling sort of month
Following an initial burst of activity in the wake of the Brexit vote, stocks took a summer vacation.
A look at the S&P 500 Index, a proxy for domestic equity markets, provides an overview of market conditions. July began with an equity market rally following the late-June decline in the wake of the U.K. referendum. August saw lackluster markets with little movement, as equity prices traded within a relatively narrow range.
- Oil prices, central banks and interest-rate policies dominated the news in September.
- Stocks moved up and down accordingly, ending the quarter near their August levels.
- Looking ahead, our outlook is largely unchanged.
The global economy continues to grow, even if the pace of growth is slow. Inflation pressure is still generally mild, and central banks remain committed to supporting economic expansion. Under these conditions, we believe any pullback in riskier assets will be short-lived.
Accordingly, we expect equities and higher-yielding debt securities to continue to outperform the low or negative yields offered by developed-economy sovereign bonds.
That said, we realize that financial markets face a significant number of uncertainties, with the U.S. presidential election, effectiveness of monetary policy and concerns about corporate profits chief among them. There are also questions about the economy in China, interest rates in Japan and the next act in the Brexit drama.
Of course, there are always challenges of one type or another facing investors, and the future can rarely be known with absolute certainty. With that in mind, a well-diversified portfolio is a traditional approach for those seeking to mitigate market volatility.
And it’s an approach we continue to believe in.
Thank you, as always, for your trust and confidence. If you have any questions or would like to discuss this further, please feel free to give me a call.
This information is provided for general information only, and is not intended as personalized investment advice. Reading the above is in no way intended to be a substitute for individualized investment advice, and no conclusions should be drawn from this information regarding any potential investment. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. This material is provided by SEI Investments Management Corporation (SIMC) for educational purposes only and is not meant to be investment advice. The reader should consult with his/her financial advisor for more information. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. There are risks involved with investing, including possible loss of principal. SIMC is a wholly owned subsidiary of SEI Investments Company. Certain material in this work is proprietary to and copyrighted by SEI Investments Management Corporation and is used by Capital Trust & Associates, LLC with permission. Reproduction or distribution of this material is prohibited and all rights are reserved.