Finally Nearing the End of
the Seven Year Itch
Saturday, October 29, 2016
Finally Nearing the End of the
Seven
Year Itch – and It’s About Time!
The Seven Year Itch, as we know it, is a term that most often
references marital relationships that reach a point in the
questioning of stability, values, and endurance around the
seventh year –the seven-year marker. This term became most
well-known following the 1955 movie of the same name starring
Marilyn Monroe and Tom Ewell, directed by Billy Wilder, and
with music by Alfred Newman (uncle to Randy Newman). I have
been using this term – the Seven Year Itch – often throughout
2016 to conjure up simple normalcies that tends to rise after
such a long period, and so have many others who look at the
stock market and the economy from the standpoint of this long
duration as well.
So it is the comparison that may connect any similarities to
the above concept; relationships of participants – workers,
job seekers, business owners, consumers in this nation, and
consumers in other nations. Then there is the consideration of
events that drive forward either the need and desire for
change, or the basis for reevaluation in determining that
staying the course may be the absolute preferable direction to
take and holds greater promise for future strengths, stronger
devotions, and contentment. We’re talking about similarities,
not absolutes, and the basis behind change.
Normally we would have ended a business cycle by now and
headed into some form of slowdown as the business climate
shifts from a robust, inflationary period, whereby the Fed
would have already begun to maneuver and, more than likely,
would have been overdoing the process of slowing and sending
the economy into a recession. After all, the Fed tends to
overshoot its ability to slow an economy, but will be slow in
getting a weak economy revived. However, if there is anything
to be learned from this long session, it’s that the Fed
doesn’t understand modern global economic procedures and the
interrelationships that transpire within this process. The
last seven years should be a good lesson.
Back to 2016: this is the second year of a two-year period in
a market that has not accomplished much and an economy that is
too often criticized for not growing fast enough. During the
last two years, we have experienced great declines and the
beginning of a New Year – 2016 – that witnessed the worst
market decline ever. So as with most years, even this year has
found its way into the history books. Despite all of this, we
are an economy here in the U.S. that continues to grow while
employment continues to move towards even more growth; just
not fast enough to become uncontrollable.
Halloween is Upon Us; The Beginning of
Another Holiday Season.
Let Us Remember what to be Thankful for
this October.
st
We have one more day before October 31 comes around and the
celebration of Halloween unfolds with lots of goodies,
costumes to hide within, and the privilege of being the last
day of October. Each year we have the honor of bringing up the
fact that statistically September has the reputation of being
the worst month of the year for the stock market. For many of
us as investors, however, we like to look past experiences and
declare October as the worst month of investing from personal
experiences.
Perhaps this is because October
leaves by far a much bigger mark on
Wall Street. Often this is because
The Great Depression began with the
market crash on October 29, 1929, a
day that became known as Black
Friday. Many investors also remember
the October crash on October 19,
1987, known as Black Monday; a day that ushered in the new
scene behind rapid and extended market movement created by
computerized trading that exacerbated the decline in the
market that day – one of the worst days on record for the
stock market. While the global economy lost 15% of total GDP
between 1929 and 1932, the Dow Jones Industrial Average in
1987, already having lost 500 points throughout September and
early October, it then lost another 500 points on October 19th.
While in today’s measurement, this would just be a bad day in
the market, on October 19, 1987, this represented a fall of
22.6% in a single day. Not much of a move to create tremendous
damage; the market didn’t use to have the kind of volatility
we often see today. Other than perhaps periods of a major
crash, the market moved so often in tandem with other assets
back then.
While
cheatin
g a bit
this
year by
one
day, it
feels
pretty
safe to
report
that
the
entire
decline in October 2016 – through Friday, October 28, 2016, to
be honest – has been a market decline so far this month of
146.06 points. Based on the petite decline of the Dow Jones
Industrial Average, today’s decline of 8.49 points, most of
the movement and volatility would appear to be on a Roman
Holiday, or in a theater near you watching some other more
interesting feature film and ignoring the financial markets on
this Friday. Besides, as you can see from the chart of
Friday’s activity, the investors really couldn’t find
direction. Perhaps ending this week nearly where it began is
appropriate. Obviously, October is a month with a lot of
history, but this year investors headed home early or maybe
they really did sneak out to see an early movie.
Considerations to Think About at This
Time of the Year
As we come to the end of October, investors should be making a
mental note that we will soon be moving beyond that last sixty
days of 2016 and moving away from 2017. In other words, that
point in time next year will become 2018.
Why is this
important? Because when we are investing, we are looking
forward and putting future valuations ahead of us. This is
what growth of capital and investment returns are premised
upon. By the end of first quarter 2017, Wall Street analysts
will begin focusing their attention on their expectations for
2018. After all, it is what lies ahead that make you money on
your investments. What happens today won’t be nearly as
important as what happens in the future. Time this year is
running short.
We’re going to part company with friends, colleagues, and
interested parties at this point as I delve a little further
into current times with some follow-through and focus on a few
of the positions we are currently holding in our client
portfolio. While much of the market doesn’t appear very
active, it also appears that there isn’t much going on with
Corporate America; this isn’t true. There is a lot going on in
specific areas and while many companies are seeing declines in
their earnings, this isn’t happening with our positions. Let’s
talk about this for a minute in our Special Client Edition, so
at this time we’ll say farewell to our other readers.
Have a Great Weekend in Preparation for Halloween!
Mark K Gaskill, Chief Investment Officer
DISCLAIMER:
The material contained herein is based on data from sources
considered to be reliable. However, MKG Financial Group, Inc.
does not guarantee or warrant the accuracy or completeness of
the information. The information is not intended to be used as
the primary basis of investment decisions, nor, because of
individual client requirements, should it be construed as a
representation by MKG as an offer, to buy or sell a security.
Any opinions and estimates expressed reflect the current
judgment of MKG and are subject to change without notice. This
report may contain forward-looking statements, which involve
risk and uncertainty. Actual results may differ significantly
from the forward-looking statements, due to economic
situations, corporate, market and political risk. Any
reference to past performance of any particular security
should not be construed as a guarantee of future results