As summer ended where was the market selloff? Instead of conforming to what historically are the weaker months of the year whereas stocks at the very least should of paused with lighter volumes, the major averages hit all time highs. The Dow Jones Industrial Average (chart), the S&P 500 (chart), the Nasdaq Composite (chart), the small-cap Russell 2000 (chart) and even the Dow Jones Transportation Average (see chart below) all hit record highs in the third quarter. In fact the broad based S&P 500 (chart) turned in its best quarterly performance in five years. In my previous blog, I spoke to how traders and investors alike are awaiting a September selloff but seemingly nothing can stop this perma-bull market! Not trade wars, not interest rates, not the threat of inflation, not the daily chaos out of Washington, not historic seasonality, I mean nothing has stopped this bull market. Without a doubt this has been a close your eyes and a “go long” market. If you just did that over the past decade, you would of been part of 100% plus gains and whoever did do that, congratulations!
So now begs the question of what now? What now is fourth quarter earnings reporting season and oh yes the mid-term elections! October will not only be loaded with corporate earnings reports but there is also this little event call mid-term elections. I think it is safe to say that at the very least volatility should rear its head up. As the summer trading months were unfolding vol went back to its “low vol” standard as we have witnessed for past decade. There is just no fear in the markets. The volatility index aka the VIX (chart) is a measure of investor fear and in this case, lack thereof. I have got to believe that volatility will increase as we head into earnings reporting season and especially as we approach mid-term elections. Good luck to all! 🙂