By Alan Valdes, director of floor operations at Silverbear Capital,
It’s here again: Another earnings season. It seems we get one day off from earnings and it begins all over again. There’s no guarantee what this earnings season will bring. However, it’s nice to see we are having an upward run in the market coming into it.
Last quarter, we saw the same type of action heading into Q3, and it turned out to be a strong quarter. If you need a little more confirmation, my friend Mike Williams and the gang at Bespoke Investment Group have compiled a few interesting facts. They’ve found that October, November, and December have been the second, third, and fifth best months for the Dow Jones Industrial Average (^DJI, DIA) over the last 20 years.
Still sitting on the side lines worried about the Tweets out of Washington? Well, here’s a little more confirmation: Over the last 20 years, the DJIA has gained, on average, 1.32% the first 9 months of the year and delivered a resounding 5.46% in the fourth quarter. Still sitting on the side lines worried that next week is the anniversary of the 1987 crash? Forget it! Not only is that “history,” markets are in a much better place.
Yes, we are at or near an “all time” high, and a correction will happen at some point. But as you step back and look at things, the U.S. is basically at full employment, and last week’s ISM Manufacturing reading was the strongest in 13 years. And now the U.S. is such a strong exporter of oil, OPEC yesterday asked American frackers to work with them to help stabilize prices by cutting back on production (a pretty desperate move by OPEC). The world is awash in money, with a reported $128 trillion in liquid equity and bond accounts. Our stock market alone has added $5 trillion since the election.
Unfortunately, even though markets around the world are stronger than ever before, we still live in volatile times. Whether it’s North Korea threatening to destroy the world, hurricanes possibly weighing on Q3 earnings, and Catalonia—probably not much of a household name a month ago—now having possible implications for our markets. My point? You never know when the next shoe may drop. That is why it’s important to be pro-active, stay educated and don’t pay too much attention to the day-to-day market noise.