Keep Confidence Index in Mind for Late-Year Investing

Advice to the Advisors

The Confidence Index for Late-Year Investing | Sheaff Brock Institutional

Keep Confidence Index in Mind for Late-Year Investing

True, September has been dubbed “the banana peel month” and October has been called the “jinx month” for investors, Sheaff Brock Managing Director Dave Gilreath observes wryly—with some of the largest “slip and fall” incidents relating to September investing and October crashes.

While the worst September ever for the S&P 500 (a 30% drop) happened a long time ago, with six more September investing drops since then, the month of September has the dubious distinction of having surpassed all others in the number of 10%+ drops. October has had its notable crashes, massacres, and meltdowns beginning with the big one in 1929, and more recently, in 1978, 1979, 1987, 1989, and 2008.

This year, September was pretty good for the S&P 500, but October was really bad. The “jinx month” pretty much erased the work done in the previous nine months.

Looking forward, however, the positive side of the history lesson is this, Gilreath points out: Quarter 4 of midterm election years through Quarter 2 of pre-election years (for example Q4 of 2018 – Q2 of 2019) have generally proved to be the best nine-month stretch of any (with supporting data going back to 1929).

As an advisor, Gilreath cautions, it’s important for you to examine the confidence factor.

Other countries’ confidence in the U.S.

Capital flows into U.S. stocks have been huge, Gilreath point out, with a lot of global liquidity seeking total return from our equity markets. With our stable underlying currency, tame inflation, and proactive tax policy, he says, our markets are highly attractive to foreign investors. Emerging markets, meanwhile, are “getting ugly,” he says, making the more stable U.S. stocks even more attractive by comparison.

U.S. consumer confidence

Investor fear that “the end is near” has increased recession chatter, but here at home, where consumer confidence has always dropped before a recession, consumer confidence is strong, with spending high across all income groups. (Walmart, Gilreath notes, posted its strongest same-store sales in a decade; at the other end of the spectrum, Tiffany & Co. announced strong annual sales growth as well.) Meanwhile, in manufacturing, the ISM (Institute for Supply Management) announced that new orders, production, and employment have all been growing, all good news for late-year investing in retail and manufacturing.

Consumer Confidence Index | Sheaff Brock Institutional

So, no, Gilreath chuckles, recession hardly seems to be around the corner. It’s particularly interesting, Gilreath observes, that these manufacturing statistics are surprising to analysts, who had expected a typical fall slowdown in the industry, even more so in light of rising trade tensions and tariffs.

As advisors, it’s important to point out to investors concerned with recent market volatility, that these confidence index statistics bode well for equity investing between now and next summer.


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