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.
The flash boys are agents of the Evil One. In light of stocks’ recent downturn, Satan seems firmly in control of the market. The flash boys, a.k.a. high frequency traders, were certainly involved in this mischief.
Volatility, on vacation for most of the past few years, is back this fall. It hit a new 52-week high in mid-October, double the level of August. That means change is afoot in the market, whose rally lulled many into complacency. So this is a good time to see where your portfolio stands in risk terms.
Every time the market swoons, as it has recently, there is a lot of handwringing, as if the natural order has disintegrated. What we are seeing is a process called “creative destruction,” and it is healthy.
The junk bond crash of the early 1990s, the tech wreck of the late 1990s, the housing bust of the last decade – all were necessary weeding out of economic structures that had outlived their usefulness.
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.
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.
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.
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.
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.
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%.