October 2016 Monthly Outlook – Time of the Season

As expected, market volatility increased in September.  Of the month’s 21 trading sessions, 13 saw the S&P 500 rise or fall by more the 0.5%.  By comparison, only 5 of August’s 23 sessions saw such a move.  Despite this uptick in volatility, the equity markets (basis S&P 500) closed basically where it ended in August (2,168.27 vs 2,170.95).

However, economic news during the September continued to show a moderate pace of growth in the US economy.  Second quarter GDP (gross domestic product) was revised up to 1.4% on the strength of better-than-expected business investment and strong consumer spending. Two separate surveys of consumer confidence (Univ. of Michigan and the Conference Board) rose in September, both indicating “rising expectations” likely reflecting increased optimism in the job market.  Inflation remains low with core personal consumption expenditures ― the Federal Reserve’s (Fed’s) preferred inflation measure ― edging upward to 1.7% year over year, still below the Fed’s 2% target. One area that hasn’t improved is personal income, rising only 0.2%.   If the US economy continues at this pace I expect the Federal Reserve to raise interest rates in December 2016, likely by 0.25%

10-3-2016_monthly_outlook_chart_1

Source: US Dept of Commerce

The outlook for the global economy is not as promising but I don’t expect the weakness internationally to derail growth in the US.

From the investing point of view, it is the Time of the Season.  We are heading into the 4th quarter, which historically has been the strongest part of the year.  Over the last 20 years, the S&5 500 has closed higher 68% of the time in October and 74% of the time in both November and December.  Another factor I feel favors a positive outlook for the balance of the year is the low level of bullish sentiment among individual investors.  The American Association of Individual Investors (AAII) conducts a weekly survey of retail-level investor sentiment.  As of 9/30/16, only 24% of respondents described themselves as “bullish”, while nearly 39% said “neutral” and 37% were “bearish”. Generally, a high degree of investor skepticism is a positive (contrarian) indicator for the financial markets.

10-3-2016_monthly_outlook_chart_2

Obviously, the wildcard this year is the election.  After the first Presidential debate, the market continues to feel the likely outcome is a Clinton win, with the Senate going back to the Democrats and the House remaining with the Republicans.

As always, I continue to monitor your portfolio and the financial markets/economic outlook and will let you know if any action is appropriate.

Please call me if you have any questions on this report or on your portfolio.

October Calendar of Events   (comments and additions for future months are always welcome)

  • October is Breast Cancer Awareness and Domestic Violence Awareness month.

 

October 1st         Start of the Jewish New Year – Rosh Hashanah – wishing all my friends and colleagues of the Jewish faith and healthy & happy holiday

October 10th       Columbus Day

October 15th      Yom Kippur

October 15th  Medicare open enrollment    thru 12/7/16 – you can switch from original Medicare to Medicare Advantage, or vice versa. You can also switch from one Medicare Advantage plan to another, or from one Medicare Part D (prescription drug) plan to another, or drop your Medicare Part D coverage altogether.

October 22nd   National Nut Day – only in America can you have a day to celebrate nuts.  Ps: peanuts are legumes, not nuts!

October 31st    Halloween

 

I hope you find this information useful.   Feel free to share this information with family, friends and colleagues.

Sources:  CNBC, SEI Private Trust, Raymond James & Associates, Schaeffer Investment Research.

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