Stocks

Why Is October Bad for Stocks?

Historically, October is the weakest period for stocks, which we have witnessed firsthand, yet again. The huge crashes of 1929 and 1987 happened during the 10th month. Why? There are several reasons, ranging from regularly occurring events to plain bad luck that for some reason lands this month.

A Strong Dollar’s Impact

Among all the ebb and flow of financial news, what is important and what isn’t? Definitely important: the dollar’s rise. This doesn’t easily lend itself to TV visuals, but it should have a big impact on investors.

Curbing Interest Rate Shock

What are the best bond investing strategies for retirees amid rising interest rates? There are two. I like to call them the “stuff in between” strategies, because they fall between bonds (whose values are vulnerable to rates increases) and stocks (usually not affected).

As the economy gradually recovers, the Federal Reserve keeps hinting at increasing rates. While higher rates are not a bad thing for retirees who invest primarily in bonds, traveling into that territory can be treacherous, and calls for some careful planning.

The Real Interest Rate Worry

Should we fear rising interest rates? Even the thought of them throws the stock market into a spin. The real problem with climbing rates, though, is that they will make servicing the out-of-control federal debt even more expensive.

For most investors, the focus is on what damage higher rates may inflict on stocks. There has been much market panic of late over the possibility that the Federal Reserve will raise rates sometime in the not-too-distant future.

What Great Rotation?

The epic bond rally that began in the early 1980s seems about to end, as the Federal Reserve eyes raising interest rates. So investors keep hearing about a so-called Great Rotation out of bonds into stocks. Well, it’s not happening, due to lingering leeriness about equities after the horrendous market slide that the financial crisis created – memories that this month’s slide have reinforced.

Avoid International Stocks?

War rages in the Middle East and Ukraine. An economic deceleration dogs China. Once again, Japan struggles to revive its economy. Europe heads into another economic slowdown. Why bother investing outside America?

Because the U.S. no longer dominates world stocks, foreign troubles will eventually abate and overseas bargains now abound.

The Market: Exaggerated Woes

What’s odd about this stock rally is how it over-reacts to events, such as turmoil overseas, that show little ability to harm the U.S. economy – which after all is what American equity values are mostly based on.

Consider the latest market buffeting. In September, the Dow Jones Industrial Average lost 0.31%, the Standard & Poor’s 500 fell 1.58%, and the Nasdaq dropped 2.15%.

Then on Oct. 1, the markets really got hammered. The Dow slid 1.4%, the S&P 500 1.32% and the Nasdaq 1.59%.

Lagging Small-Caps: Bad Sign

The stock market rally of 2014 is not uniform. Turns out that not all stocks are created equal. Small–cap stocks are negative this year, at odds with their historical tendency to do well in an economic expansion. That sounds a cautionary note for investors.

Top Mistakes Investors Make

Investors are human and they make lots of mistakes. A panel at National Financial Advisors Week spotlighted some of these errors and had some good tips on how to avoid them.

When the stock market goes south is when a lot of mistakes occur. “History shows we are overdue for a correction,” noted David Callaway, editor-in chief of USA Today and the panel’s moderator.

Invest in Private Companies?

Should you invest in non-public companies? A lot of people are doing that, via privately issued equities and debt instruments; hedge funds, venture capital funds and limited partnerships are also popular non-public companies.

This trend includes a broad swath of industries, just not tech companies. Banking is the largest in dollar terms. An advisor presentation on private investing, as part of National Financial Advisor Week, noted that this arena is an increasingly popular and profitable one.

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