October is just about in the books and for the markets it’s proved a wild and crazy ride to nowhere. On September 30 the S&P 500 closed at 1972. In early trading today that number is right around 2010. That’s about 2% higher or well above the 0.66% average since 1950.
Getting here, as you’ll remember, was not easy.
So what is there to learn from the almost-correction in the first half of the month? Zachary Karabell, head of global strategy for Envestnet notes, “there have been multiple periods like this in the past three or four years where there’s been huge amounts of volatility or churn and the headlines throughout each of those periods forecast all the dominoes falling...and then we kind of end up kind of in the same trend line we’ve been in.”
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Karabell says this time is no different. “As long as there’s decent economic growth, and more than decent earnings growth, and some decent revenue growth on the part of companies, stocks are gonna go up,” he contends.
That, he says backs up his belief that for all the gnashing of teeth over the Fed, Yellen and company aren’t THE engine behind the markets but rather are one of many engines. As the QE liquidity program goes into storage the Bank of Japan announces the latest round of their own version and that, says Karabell, means there will always be enough global liquidity to go around.
So how do you play such a market? Don’t be a “trader” Karabell says. He believes once we crunch recent data we very well might find that rapid traders will under perform good old buy and hold investors. “I don’t think selling right now is necessarily the way to go unless you’re so convinced we’re gonna have the same patterns” we did earlier this month.
Sure, if you believe in your heart of hearts that stocks are headed back into correction territory then find a comfy chair and sit on the sidelines. If, however, you are like Karabell and believe the economic and earnings soil is rich enough to grow stocks then get invested, keep getting invested and sit tight.
It may not be exciting investing but it’s Karabell’s recipe for success.
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