So far, October has simply been a spectacular month—the S&P 500 has rallied 3.6% while the Dow is up about 1.7%.
More importantly, October was the final last-ditch effort for the “Sell in May” crowd to feel vindicated, since there are plenty of pundits that like to spook investors into going to cash over the summer and not coming back to the market until after Halloween.
So with about one week left until November begins—the start of the seasonally-strongest time of year—it’s looking like investors that went to cash over the summer have lost out on nearly 10% gains.
I warned you about this earlier this year in my May forecast, closing with:
“So before you ask me whether you should ‘sell in May and go away,’ please know that my answer is an emphatic ‘no.’ While there may be some bumpiness ahead, cashing out of top-rated stocks prematurely could be a costly mistake.”
I also discussed the “Sell in May” phenomena when looking at 10 stocks to stay away from and said:
“…the stock market is not the enemy. The real enemy is fear. It makes investors buy and sell at the worst possible times. So instead of cashing out completely, the best way to prepare for seasonal volatility is by realigning your portfolio for maximum performance.”
So next year, keep in mind that there are always going to be fear-based distractions for the market. This year, it was the government shutdown, but the good news is that the market did its best to ignore the partisan bickering.
And as a result, the S&P 500 is again hitting new all-time highs just as we enter the seasonally strongest time of year. Through year end, we’ll see an uptick in pension funding (a phenomenon known as the “Early January Effect”). On top of this, the holiday season tends to make consumers and investors alike more optimistic—which should fuel increased spending on Main Street and higher trading volumes on Wall Street.
So right now is lock-and-load time as earnings heats up, and while we will of course have some corrections from time to time, I expect the next several months to overall be stunning—and I don’t want you to miss out on the next double-digit gains from the market.
In fact, right now I particularly see upside for our smaller and more nimble Emerging Growth and Ultimate Growth stocks, which have been trouncing the market (our average Emerging stock is up more than 7.7% so far in October, while our Ultimate stocks are up a stunning 8.8%).
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