I have been very good this year, with minimal volatility and producing 20% returns for the second year in a row! I included more friends in my rally this year, not just the Magnificent 7, and I brought along utilities, financials, and industrials. I even invited some of the old-school blue-chip names like WMT and AXP to join the rally party. I only dropped -8% one time all year, not even the normal -10% correction that would be expected. And with the VIX below 15, you can tell I have been consistent and upward trending. I was very nice this year, not naughty!
October has garnered the reputation as a spooky month, and not just due to Halloween. The dreaded âOctober surpriseâ is typically a nasty political shock and the market has experienced extreme historical volThe election overhang is finally behind us, Q3 earnings season is about 90% done, and the bull market has survived its historically weakest period with nary a blemish. But even with all that noise comfortably behind us, there is a feeling now of, now what? And for many, the worry cycle has begun once again. The What-ifs are endless with a new administration looking to pivot policy and potential for unprecedented overhauls to government (DOGE- the Department of Government Efficiency) or the removal of the Fedâs independence loom in the distance. We often warn about waiting for disaster and betting on doom-and-gloom. And we caution investors about reading too deeply into geopolitical events as they are poor predictors of market directionality. atility in Octoberâs past. But we view October through a more positive lens; we are about to enter the strongest 6-month seasonal period for equity markets. Even in election years, November and December are often very strong, typically powered by the Santa Clause rally to close out the year. Â
October has garnered the reputation as a spooky month, and not just due to Halloween. The dreaded âOctober surpriseâ is typically a nasty political shock and the market has experienced extreme historical volatility in Octoberâs past. But we view October through a more positive lens; we are about to enter the strongest 6-month seasonal period for equity markets. Even in election years, November and December are often very strong, typically powered by the Santa Clause rally to close out the year. Â
Portfolio construction is a delicate balance of diversification vs. conviction. Often the proper allocation is driven by Modern Portfolio Theory (MPT) and an efficient frontier, which was developed in 1952 by Harry Markowitz in his dissertation on Portfolio Selection.
A few bad months does not mean the end of a bull market. Itâs often best to bear the short-term loss and hang in there for the high probability of long-term gains and a year-end rally.
Itâs a full-time job staying sane in this world gone mad. Politics are polarized and evolving rapidly, the economy keeps giving mixed signals vacillating between growth and being on life support, and the markets just violently rotated out of the popular mega-cap tech trade and into the unloved small and value sectors.
All that is certain in life are death and taxes, but taxes are about to get a whole lot less certain. We are potentially exiting a period of decades of more tax friendly policies and may see the pendulum shift towards higher tax rates for individuals and corporations.
May gets a bad rap about being a capitulation month in the markets. Sell in May and go away, the adage goes. But itâs not May that is the problem, itâs fall. Typically, when looking at 6-month seasonal patterns, the May-October 6-month period is one of the weakest, but if you look at it on a month-by-month basis, May, June, and July are not horrible months. Â The problem comes in September. September is by far the weakest seasonal month of the year, followed by February, but that is not Mayâs fault.
The Middle East recently went from simmering to a full-on boil with the Iranian missile and drone attack on Israel. This attack (in retaliation for a suspected Israeli strike on the Iranian Embassy in Syria) raised the stakes that Israel could retaliate with a direct attack on Iran, and from there, all bets are off on controlling the situation and how it might escalate. War is a terrible thing, and the human cost and suffering goes beyond the economic consequences discussed here. However, our job is to advise on a potential market reaction and not to weigh in on politics.
Tax Season is here and whether youâve filed, working on your taxes, or using an extension to file in October, you may need a drink or two to help get you through everyoneâs favorite time of the year. Thatâs the great thing about wine, itâs enjoyable for any occasion and has a way of improving your spirits. For those who are embracing an early spring, perhaps a refreshing Sauvignon Blanc on your back porch is a great way to spend your later afternoon unwinding from the burdens of the day. And for those who still have cooler evenings, a light-bodied Pinot Noir would be a great pairing. Lastly, for those who just love Cabernet Sauvignon regardless of pairings and the weather, you just canât go wrong with a great glass of Cab.
