Fisher Investments Editorial Staff
Media Hype/Myths, Investor Sentiment, Market Cycles

Fall Classic

By, 11/02/2009

Story Highlights:

  • In 2009, global stocks have shattered many seasonal myths: "Sell in May and go away"? Bad idea. "September and October are always big down months"? Wrong again!
  • Investors should focus on the continuing bull market and recovering global economy, and not get sidetracked by fear or other unsubstantiated market theories.


Every October (and now into November), sports fans turn their attention to America's Pastime as the best of the National and American Leagues battle in the World Series. As we watch the games and listen to the commentary, we hear an endless stream of so-called truths: "The postseason's about pitching and defense"…"You can't win on two walks and a three-run homer—small ball decides these games"…"Whoever has the momentum wins the series."

Of course, such heuristics are sometimes true, sometimes not. We see blowouts and slugfests, bad pitching, terrible defense, and momentum shifts from game to game. Yet the broadcasters never acknowledge this, even when the myths are shattered before their eyes.

Similarly, some investing clichés never die. This year they were especially prevalent. "Sell in May and go away!"…"September and October are always the worst months!"

Of course, just as Chase Utley killed the small ball myth in game one of this year's Series, global stocks have shattered the market's seasonal myths, returning 27.5% from May through September and nearly 4% in September. Meanwhile, October may finish down a little, but it's hardly the worst month this year.

Don't expect to see much acknowledgment though—most folks are retaining a decidedly negative bias and have ignored the market's mythbusting efforts. Similarly, we're not hearing much about November and December's great prospects, even though these months have historically been among the best for stocks. This shouldn't surprise; it's confirmation bias at work. Results don't support the hypothesis? No problem! Just ignore them for now, until it seems to be true again.

The market loves nothing more than scuttling expectations—we don't call it "The Great Humiliator" for nothing. More importantly, all the good month/bad month myths have little to do with longer-term trends.

But it's notable a similar seasonal myth—that November and December are traditionally two of the market's strongest months—isn't being touted today either. Why? Probably because it doesn't fit the generally dour sentiment of today. In reality, it matters not that we're heading toward the jolly days of flying turkeys and Santa Claus. What does matter: A big bull market in its nascency, a steadily recovering global economy, and myriad unappreciated positive fundamentals to bolster both looking ahead. Even if some months end up weaker than others, it shouldn't derail the larger upward trend as we begin looking toward 2010. Sweeps, after all, are rare in stocks and baseball: Just as this World Series is tied at one right now, stocks won't win every month. But a little volatility is normal and shouldn't prevent them from being a clear winner at the end.

That doesn't mean there won't be some nail-biting in the stands in the meantime. Yankees fans remember losing the 2001 and 2003 Series, Phillies fans dread a repeat of 1993, and investors are still smarting from the bear market and an uncharacteristically weak decade. A little fixation on further losses from here is a natural emotional response. But fear of the past shouldn't prevent one from seeing today's potential. Just as this year's Yankees aren't tailoring their lineup to face the ghosts of Curt Schilling, Randy Johnson, and Josh Beckett, and the Phillies aren't stacking their rotation against the memory of Joe Carter, investors shouldn't base portfolio decisions on last year's volatility. This is a new World Series and a new bull market.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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