Well, as expected, September turned out to be negative (down around 1.4% for the S&P500). Thankfully, not by much. However, October started out like it wanted to be in on the action, finishing the job that September started. This is fairly typical of “spooky” October. Like a mischievous uncle, it shouts “BOO” at first, then ends up giving us candy by the end of the year.
The chart on the left (from SeekingAlpha.com) shows just how “scary” the fall season can get, and why we believe things generally improve going into the end of the year.
Of course this chart only shows the US markets, but the effect can be fairly similar across the globe during the same time periods.
The greatest seasonal weakness has been in international markets: down a little more than twice that of the US markets last month. This was enough to cause us to reduce our exposure to the international markets in some of our strategies.
Changing focus to the world of bonds, Pimco Total Return has been in the headlines recently. With the departure of rock star fund manager Bill Gross, there has been a lot of buzz about the issues that large outflows may create for their investors. Massive fund redemptions could cause the fund to sell off more investments than they had planned for, leading to unexpected capital gains (or losses).
We’d like our investors to know that we removed the Pimco Total Return fund early this year in favor of a comparable offering by Loomis Sayles. In hindsight, this has been a good choice. It’s interesting to see how often our numbers-based reasons for making changes keeps us ahead of (or out of the way of) these issues.
And even though this time of the year is much like a gloomy, rainy day, never forget it’s the rain that makes everything grow! Like eating your vegetables, you know it’s good for you, even though it’s not always that enjoyable. How else would we get the opportunity to buy “on sale” investments?
A tip that was so good, we’re giving it again…!
Investing Tip: October is historically the best time of the year to make lump sum or extra contributions to your retirement account(s). Since it normally follows a September dip, the idea here is: buy lower-er, sell high-er. Make sense? Please contact us if you’d like to make an IRA or Roth IRA contribution in October.