I have listened to the weather forecast many times in my life, and I believe that they are correct some of the time. The rest of the time, well, they are just plain wrong. So why do we listen to them at all? Perhaps we are just looking for someone to give us their best guess. Maybe we want it to be sunny out, so we will look for someone to agree with us?
Sometimes investing is like listening to the local forecast. We know that it’s just a guess, but we want to hear it anyway; kind of like reading your horoscope perhaps.
Well I’m no weatherman and I don’t look to the stars for answers, but I did find these facts interesting:
Did you know that this year, the market has not closed below last year’s ending balance on any day? That’s right, every single day the market has been up this year as compared to where it ended last year. That’s pretty amazing! But it doesn’t end there.
Did you also know that both September AND October were up this year? In the past 30 years, that has only happened four other times. In other words, five years out of 30 (this year and the other four) both September and October were up, which works out to only 16.6 percent of the time.
So far in 2013, the bulls have been running around in the sunshine.
So what does this tell us about what may come in 2014? Given the bull market we are currently in, does that mean it will continue? And if it does continue, how long will the sun shine on your investments?
Those are really good questions to ask. And looking back into history might help provide some guidance.
Generally speaking, how the market performs in one year has no influence over what it will do the following year. If this year is up, next year is still a flip of the coin. If this year is down, next year is still a flip of the coin, as well. In other words, there is no correlation between market performances from one year to the next.
But there is a definite correlation between the last four times that September and October were both up. History shows that it tends to bode very poorly for the following year. The last time both September and October were up was, you guessed it, 2007. And how well did that work out for you in 2008?
Here’s my point. Just because a bull market is running now does not mean that it will continue into next year. It might, or it might not. The more important question you should be asking yourself is simply this:
How well are you protected when this bull gets tired of running?
If you are like many people, you really don’t know, unless you’ve had your portfolio risk tested or stress tested.
If you’re not sure what that means or how that could be done, just give us a call and we’d be happy to go over it in more detail. Just like a good farmer, you should know how to take advantage of the weather, rain or shine.