This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer
The next week will be filled with costumes and candy as kids cash in on strangers’ sugar donations.
How do these traditions get started? Who was the first parent to dress their children in costumes, walk them up to a stranger’s door, and instruct them to threaten whoever answers the door with a trick unless they provide a treat?
It just doesn’t make any logical sense. And maybe that is the magic of it.
October can be a magical trick or treat kind of month for the financial markets as well. Sometimes we experience a tricky downward trend accelerating. Sometimes we experience the start of a treaty upward trend.
This October is starting to feel a bit more treaty than tricky. Yes, there is still plenty of uncertainty in the world, but it is starting to look like there may be some good kids behind the scary masks. Here are my humble thoughts on why it feels like we may be at least in the neighborhood of a market bottom:
- Intraday volatility has picked up. Many times around a market bottom intraday volatility picks up as the capitulating sellers and opportunistic buyers dance energetically.
- Individual investors are extremely bearish. It is always darkest and coldest before the dawn, and highly pessimistic individual investors can be an optimistic sign of future demand to buy stocks (since they likely have sold their stocks if they are so pessimistic).
- The interest rates up/stocks down trend has paused. Stock traders are no longer selling even as interest rates continue to rise. This is a change in trend that could indicate those who want to sell their stocks at low(er) prices have already done so.
- Federal Reserve members are (slightly) changing their tune. Over the last week Federal Reserve members have expressed a more nuanced approach to future rate hikes that at least considers maintaining some economic growth instead of their previous “stop inflation at all costs” stance.
- Christmas is coming. While certainly not guaranteed, the end of the year can bring strong upside swings in market momentum.
Of course, the financial markets never do my bidding and there could be some scarier surprises just around the corner. I am humble enough to acknowledge I cannot predict the future with any amount of certainty.
However, all it takes is a little optimism about where the economy will be next spring or summer to turn a tricky fall downturn into a future treat.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
Quote of the week:
Benjamin Graham: “The intelligent investor realizes that stocks become more risky, not less, as their prices rise – and less risky, not more, as their prices fall. The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs) you should welcome a bear market.”