Is October a Trick or Treat Month?

One of my least favorite rites of passage for children and even some adults is Halloween. It's a night for teaching our children to beg for the sugar and carbs that makes us one of the most obese countries in the world. It's a night where teenagers feel they have free pass to inflict mischief on society and a night for adults to revert to drunken adolescence. It is also one of my least favorite months for markets. Over the last 20 years, October is one of the three best performing months finishing in positive territory 70% of the time. However, the scars inflicted during our investment lifetimes in this month continue to haunt me during this time of Halloween. Most of us were too young or not around when the Great Depression's was born October, 1929. However in 1987, we saw 23% of portfolios evaporate on that "Black Monday." Most recently, we are still egg shell walking because of the pain inflicted during the 19 day span in October when the Dow regurgitated 2675 points, and we stared into the financial abyss. We still live with 5 of the top 10 historically biggest daily drops in the Dow's 123 year history and are still queasy from that circus ride.

Why so negative, Gib!? If you're a client, you have read our emails or watched our video   (CLICK HERE) about our trepidation looking ahead. We have an election that seems to lean toward a re-election of a President dead-set on raising taxes on upper-end tax payers while implementing programs that seem to redistribute wealth fairly in his world. Regardless of the election results, we will have lame duck session of Congress where at the best very little is accomplished to set our country on the path of fiscal responsibility and at its worst sees our economy ride Niagara Falls over the edge. Corporate earnings outlooks are looking dire for the remainder of the year and into 2013. Europe is still talking…talking…talking as their recessions deepens while China's economy is slowing dramatically. The Middle East uprisings that left our Libyan Ambassador dead is a reminder of our impotence in 1979 as gas prices creep further northward while the Iranians and Israelis seem to be headed beyond saber rattling.

In normal times, any two or three of these together are reasons for pause. However, the Fed's unneeded QE3 has, as Bill Gross said last week, given us more methamphetamine while buying our markets more time as money continues to chase the only place where there is dividend yield or potential growth. This seems to have eliminated the chance of the trick being in October and more likely moving that date to the lame duck session or first quarter of 2013. The markets seem content to price in slowly the negativity mentioned. But eventually the tonnage of these accumulated events will break the proverbial camel's back.

We maintain our negative outlook for markets in general and will begin making moves in our client's portfolios accordingly. Enjoy what should be a month of more treat than trick, however make sure your advisor has something other than candy for the tricks coming our way. Source: “It’s October: Is the stock market crash-proof?” Adam Shell, USA Today. October 2, 2012. “Bill Goss: US Addicted to “Budgetary Crystal Meth’. CNBC. Jeff Cox, October 2, 2012.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance references is historical and is no guarantee of future results. All indicies are unmanaged and may not be invested into directly.