The Beginning of Fall Blues
Flexible Plan Investments
By Jerry Wagner
September 25, 2012
I only have time for a short note today. It’s probably a reflection of the shorter days that fall ushers in or maybe the increased pace of business that the end of summer vacations seems to ignite.
Speaking of seasons, the market weakness we saw last week is just what our Political Seasonality Index has been suggesting that the stock market might have in store for us in this period.
Actually, we have been fortunate that it has not been as bad as many were suggesting. September and early October can be treacherous in the stock market. Even the Feds “shock and awe” announcement has not been enough to drive away the minus sign. Fortunately, though, the number following the sign has, in most cases, also been followed by a decimal point. Very few indexes or strategies have tumbled more than 1%. In fact, the Dow, itself, has not had a 1% or greater down day in 61 trading days. Remember how many there were last year?
In line with the seasonal discussion, I note an interesting finding by Robert Hanna in his excellent research report Quantifiable Edges (www.quantifiableedges.com). Rob found that “Since 1961 the week following the 3rd Friday in September has produced the most bearish results of any week.” And that week is this week.
Of course, no one knows in advance how the week will actually play out, but Rob did show what an investment would look like over that time period if one had only been invested during the third week of September. It is not a pretty picture.
Finally, I’ve spoken much of this sudden sink hole Monday’s have become for stocks. No matter where the market overall has been heading, Mondays have generally been down. And once again, today was not an exception as bad economic news here, in Europe, and in China were a drag on stocks.
I would be remiss, however, if I did not mention that Fridays this year have been as good as Mondays have been bad. In fact, as the chart below indicates, Fridays have been up more than Mondays have been down. Not only that, but all of the days of the week have been positive EXCEPT Monday so far this year.
With a supportive Federal Reserve, lower interest rates, a new earnings reporting season on the horizon, the uptrend still intact, investors still not overly enthusiastic, and five of nine economic reports last week registering better-than-expected results, maybe we can avoid the fall blues that so often hit after summer’s days are done. If we do, it doesn’t look like it will start on a Monday… but there are four other days to a week.
All the best,
Jerry
Election Year Update:
National Polls:
RealClearPolitics two-month average: Obama +3.7%
Average of Likely Voter polls: +3.9
On this date in 2008: Obama 3.5
On this date in 2004: Bush +5.6%
14 Battleground State Polls (10 reporting since conventions):
RealClearPolitics two-month average: 12 Obama/2 Romney
Last State poll: 11 Obama/3 Romney
Improving over average poll: 3 Romney/11 Obama
Here’s a good explanation of why the 2008’s best pollster has the race much closer, while most of the rest are in the Obama camp: http://pjmedia.com/tatler/2012/09/23/skewed-and-unskewed-polls/
Only time will tell, who’s right this time around.
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