You Can’t Debate this; October is Huge for Stocks

Watch company earnings in October.

Will your favorite presidential candidate win the town meeting format debate at Hofstra University in Hempstead, New York tonight?  As I stated in a previous blog post, the winner of the debate, and the presidential election, makes no difference to your stock market investments.

When it comes down to managing your stock market investments now, there are much more important things for you to be concerned about this October.

Halloween is not the only scary event that Minnesota stock market investors face every October. The buy-and-hold stock market investors should be downright spooked about this time of year. The reason is that the two biggest stock market events of the last ten years both took place during the month of October.

The 2002 to 2007 stock market advance began on October 9, 2002. In the next five years after that date, both the Dow Jones Industrials and the S&P 500 index would just about double in value.

That same stock market rally also ended in the month of October. From October 2007 to March 2009, both the Dow Jones Industrials and the S&P 500 index lost about one-half of their value.

The stock market goes up and down based mostly on the outlook for company earnings.  The stock market advance of the last few months has been based on the hope that the U.S. economic will “get better” soon.

Earnings announcements for all sizes of U.S. companies are in full swing beginning this week until the end of this month.  Every major U.S. company is going public with their company earnings outlook for the next few quarters.

The solutions for just about every U.S. economic problem now…unemployment, college debt, home prices…can be fixed by better company earnings going forward.

When the stock market professionals think that company earnings will slow down or go down in the next few months, this current stock market rally will be as stale as a bag of candy on November 1st.

Now is not the time to buy-and-hold your stock market gains away.  Just because you did not have to pay much attention to your stock market investments over the first nine months of this year does not mean the same passive investment management strategy will work over the last three months of the year.

Over the next few weeks, pay close attention to what U.S. companies say about their earnings going forward.  Earnings are the best stock market indicator that you ever see or hear about.

If U.S. company earnings are at risk beginning this quarter and into 2013, then so are your recent stock market investments.

Ric Lager
Lager & Company, Inc.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

kisfutures October 31, 2012 at 07:09 AM
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