>The question on everyone’s mind these days is “now what?” The summer is over, kids are back in school and the market has tacked on another nearly 4% while we were on vacation. Is it 2008 all over again? Is it too late to sell? Nothing good ever happens in the month of September, right? These are the types of questions that I have been fielding over the past week or so.
If history is correct; September is no walk in the park. However, proving that one cannot predict a market; the S&P has experienced a gain in 4 out of the last 5years. Therefore, the bottom line is that we have absolutely no way of knowing whether this September is going to be a positive or a negative. Our method of investing using the three factor model (asset allocation, diversification and rebalancing) keeps us in the game and allows us not to base our portfolio on a misguided prediction.
There is still a tremendous level of pessimism in the US. People are scared to death on what to do with their money.
In fact, one of my clients, wanted to go to 30 to 40 percent cash because a “Congressman” told this person that after the November elections the market was going to crash! Since she has a very conservative portfolio overweighed in short term income, why would I do that? Politicians are great money managers aren’t they?
With all the pessimism out there one would think that we were down 30% or more in the market for the year (We are actually only down by about 1.88% this year). We are closing in on the same public investor fear levels as 2008-2009. Where is the pessimism coming from?
The second quarter of 2010 should be the third in a row when earnings growth exceeds 30%. The last time that happened was 1983. July 1, 1983 the Dow was at 1233.13.
Do I hear the Toby Keith signing in the background “How do you like me now?”
Can you name two global double –dip recessions in the past century? There has never been one, so let’s stop talking about it.
Whenever people figure out these are false fears the rebound will resume. My clients in our equity oriented portfolios, who never left the game, will be happy to rebalance and sell at a much higher price than what we bought them for.
The public is selling, and the smart money is very bullish. I hope you are also. Have a great Labor Day Weekend.