“You and I do not see things as they are. We see things as we are.”
The entire country is waiting in suspense for the results of the vote that will determine the new President. As of Sunday evening, the race is shaping up to be a “photo-finish” with Mitt Romney leading President Obama by a 49%-to-48% margin based on the most recent Rasmussen pre-election poll (the polling organization with the most accurate projection in 2008). The outcome may just as easily be decided by a court of law as it could be at the ballots. I will avoid expressing my personal views of either candidate or predictions about who is likely to win. However, I feel it is more interesting – as an outsider – to share my opinion about what the election race is saying about the country.
Almost twenty years ago, the US initiated a campaign of “Shock and Awe” with its bombing campaign on the Iraqi capital city of Bagdad. According to Wikipedia:
‘Shock and Awe’ (technically known as rapid dominance) is a military doctrine based on the use of overwhelming power, dominant battlefield awareness, dominant maneuvers, and spectacular displays of force to paralyze an adversary’s perception of the battlefield and destroy its will to fight. The doctrine was written by Harlan K. Ullman and James P. Wade in 1996 and is a product of the National Defense University of the United States.
Market Leaders strives for higher returns with less risk through actively allocating to the
leading asset classes that can add to portfolio performance and avoiding the laggards that can drain performance. This is a two-part statement: adding value comes from not only owning the leaders, but also avoiding the laggards.
Speaking of laggards, it would be hard to miss the headlines for the past year covering all of the problems in Europe: “Greece on Brink of Bankruptcy,” “Spain next to Default?,” “Will the Euro Survive?,” etc. The European Union is the world’s largest economy and therefore has an impact on our markets because we live in a global economy.
We were flying back to the USA from London on a jumbo jet Saturday. The cabin attendant looked at us and said, “Did you just fly this route?” “Nope, not for many years,” I replied. “I could have sworn I just stopped and talked to you,” he said. Simultaneously, we both blurted out, “Déjà vu!”
I don’t know about you, but I always have an optimistic view of summer time. Maybe it’s my Midwest background, where summer is usually preceded with the cold of winter and then the rainy days of spring. When the sun is finally shining every day, it’s just hard to feel gloomy.
If you are into investment newsletters like I am, you read a lot of them. Right now, almost every one of them is making mention of that yearly phenomenon summed up by a common Wall Street saying, “Sell in May and Go Away.”
The saying refers to the stock market’s habit of taking a summer swoon and a September plunge each year. It then recovers for its traditional year-end Santa Claus rally. And there is some truth in the saying.
Remember last year? The market peaked in late April and then didn’t return to rally mode until the leaves were falling in the fall. Market historians point to the pervasiveness of the market’s tendency to follow this pattern. Here’s the monthly history, and it’s true – the summer is not pretty when it comes to stock prices: