- It may be time for its “post-earnings nap”
Written by Keith Springer | 2.7.13
It’s been a great beginning to the year coming out of the gate, largely stemming from an uneventful fiscal cliff settlement and better than expected earnings. This has brought a lot of investors out of their slumber, looking for higher yielding alternatives, and simply the fear of missing out. Yes, complacency is running high, and that is definitely a warning sign, for “when life looks like easy street there’s danger at your door.”
However, I have noticed a trend that I have written about and discussed on the radio, but have seen little of it elsewhere. A little something I have dubbed the “Post-Earnings Nap”. For the last few years, stocks have sold off heading into earnings season as investors prepare for disappointment, only to have earnings come in better than expected, consequently creating a nice little rally. Then, as we approach the end of earnings announcement, stocks have consolidated or sold off for a few weeks, and that is where we could be right now. This would coincide nicely with the sequester debate coming up on its March 1st deadline, which is going to be downright ugly and scare the bejesus out of investors.
However in the bigger picture, Bernanke and the boys are printing and spending money like a drunken sailor. Like it or not, that’s good for the stock market, until of course all of a sudden its not and this bubble we are in bursts like the others the Fed has created. Although, you have to love the January Barometer which is encouraging, as the saying goes, “How goes the month, so goes the year”.
Looking back sixty three years (starting with 1950) this indicator has a 90% accuracy rate. There have been thirty-nine positive Januarys; thirty-five were followed with positive gains. Only three years failed to follow January gains: 2001, 1994 and 1996, all of which ended with losses. Year 2011 had a positive January, but finished flat. The average gain for the full year following a positive January was 16.5%. Impressive. That is almost 2x’s the average annual gain of 8.7% over the full sixty-three years. As you know, I love stats like this. The only problem is that when something is widely expected, it seldom occurs that way. Or as my favorite saying goes, if it’s obvious, it’s obviously wrong!
Even if this prophecy turns true, it will not be an easy year for investors. Given our “Post-Earnings Nap” period, along with the fact that February is a mean cruel month (the 2nd worst performing after September), many investors are sure to be caught off-guard. Do not be lulled into complacency just because you have had a few up months on your 401k statement. Now is the time to make adjustments and remove some risk. Take this calm period to make sure you are positioned in the proper risk-adjusted portfolios. In this environment, it has never been more important to be the real expert, or hire one.
This market environment is precisely why I built our powerful Investment Management Strategy which applies our structured and disciplined, tactically managed approach, to managing assets for our clients, by managing risk and delivering returns in any market. Unlike any buy and hold scheme, mutual fund program, or many other money managers, we utilize an active style to managing our client’s assets with a hands-on, “tactical” approach, that can change quickly between strategies, and go to cash during dangerous times. I have been managing money for over 29 years, and it works.
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