We’re still waiting…. If the traditional September stock market pullback doesn’t happen, conventional wisdom says we should look for it in October. October, after all, is historically just as stormy – memories of the crash of ‘87 and even the big post-Lehman DJIA collapse keep investors cautious.
Caution is even more advisable when you’ve got the Wall Street Journal reporting that Q3 (2009) saw the highest DOW returns since 1998. And 2009 hasn’t seen any meaningful September-October decline yet. What’s meaningful? Jim Huang (T.I.P. Wealth Manager) says a 5-10% correction (at a minimum) should be expected at this point, and at any one time we’ve only seen about a 4% correction so far.
What’s Ahead For Stock Markets in October
First things first, October 1 marked the beginning of the fourth quarter. This means we can expect to see company earnings reports coming in as early as October 7th – so watch out for signs of real earnings growth and not just the effects of cost-cutting.
October 22 and October 29 in particular are heavy reporting days, with over 45 companies reporting results on each day. Check your stock watchlist, and your portfolio to see when your company reports. Just before and just after reports releases could be good times to enter and exit stocks depending on expectations and results.
Heating season will begin in northerly parts, and this could put some floor beneath natural gas prices finally. Keep an eye out and consider some nat gas plays now if you want to get in before prices rise again.
What To Do With Your Money October 2009
Jim Huang recommends just dipping back into markets bit by bit, cautiously. Despite the huge run up, there may still be value pockets in various places. There isn’t any one single sector you should be looking out for. There are no more fire-sales anymore, but there is also still some upside in various stocks depending on the length of your outlook. If you’re in it for the long-term, you’ll have more choice.
In general, all money markets are doing poorly at this time, with interest rates at paltry levels. Benjamin Tal of CIBC World Markets recommends investors look to blue-chip dividend-paying stocks since those will have some hope of keeping up with the inflation headed down the road, as well as giving you a higher return on your money now.
If you think inflation will be a serious threat in the next 12 months, cash is not going to be the best place to sit, especially if it’s in US dollars (since the US has undertaken the most quantitative easing). Putting your money in conservative, defensive equities that pay dividends might be a better bet – unless you can find a satisfying return in some very high-yield savings account.
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