Important Things to Keep in Mind for Late-Year InvestingSheaff Briefs Editor
Not for naught has September been dubbed “the banana peel month” and October the “jinx month” for investors, Sheaff Brock Managing Director Dave Gilreath observes wryly—some of the largest “slip and fall” and “crash” incidents seem to relate to late-year investing.
To be sure, the worst September ever for the S&P 500 (a 30% drop) happened a long time ago. Still, with six more September investing drops since then, the month of September has the dubious distinction of having surpassed all others in the number of 10%+ drops. October has had its notable crashes, massacres, and meltdowns beginning with the big one in 1929, and more recently, in 1978, 1979, 1987, 1989, and 2008.
This year, September was pretty good for the S&P 500, but October was really bad. The “jinx month” pretty much erased the work done in the previous nine months.
However, historically speaking, Gilreath adds, Quarter 4 of midterm election years through Quarter 2 of pre-election years (for example Q4 of 2018—Q2 of 2019) have very often proven to be the best nine-month stretch of any, based on data going back to 1929.
More currently, capital flows in U.S. stocks have been huge, Gilreath points out, with a lot of global liquidity seeking total return from our equity markets. With a stable underlying currency, tame inflation, and a proactive tax policy, our markets are highly attractive to foreign investors. Another factor driving the flow of capital into our country is that emerging markets “are getting ugly,” he says.
Investor fear that “the end is near” has increased recession chatter, but here at home, where consumer confidence has always dropped before a recession, consumer confidence is strong, with spending high across all income groups. (Walmart, Gilreath notes, posted its strongest same-store sales in a decade; at the other end of the spectrum, Tiffany & Co. announced strong annual sales growth as well.) Meanwhile, in manufacturing, the ISM (Institute for Supply Management) announced that new orders, production, and employment have all been growing, all good news for late-year investing in retail and manufacturing.
So, no, Gilreath chuckles, recession hardly seems to be around the corner. It’s particularly interesting, Gilreath observes, that these manufacturing statistics are surprising to analysts, who had expected a typical fall slowdown in the industry, even more so in light of rising trade tensions and tariffs.
Needless to say, these statistics, fall market volatility notwithstanding, can bode well for late-year investing and beyond.