Third Quarter 2011 Market Analysis

Posted by David Fevergeon - September 15, 2011 - Market Analysis - No Comments

Although the 3rd quarter performance for the S&P 500 has been less than favorable (and quite volatile), it may be helpful to look at historic performance trends for the index as we enter the latter part of the year.  In the last 20 years (1991-2010), the S&P 500 stock index has gained more on a total return basis during the 4th quarter (i.e., October-November-December) than it has during the other 3 quarters combined.  The final 3 months of the year have gained 150.9% (total return) vs. a gain of 129.2% for the first 9 months of the year over the last 2 decades (source: BTN Research).  Furthermore, the best monthly performance on a total return basis for the S&P 500 over the last decade (2001-2010) has occurred in April, October or November in 9 of those 10 years.  The only year that 1 of these 3 months did not lead the way was in calendar year 2010 when September was the best month (source: BTN Research).

As we ponder the various reasons for the weak market performance over the last two months, perhaps the most recent explanation can be attributed to a revised economic growth forecast from top economists with the National Association for Business Economics.  In their latest forecast, the economists predict that the U.S. economy will grow 1.7 percent this year — down from the group’s May prediction of 2.8 percent expansion.  For 2012, the group is forecasting growth of 2.3 percent, compared to a May forecast of 3.2 percent growth.  In these slow-growth, uncertain times, I continue to recommend the use of higher yielding investments in a client’s portfolio.  These assets can help reduce portfolio volatility and provide a stable income stream.  As always, if you have any questions regarding your plan for the upcoming year, please give me a call at your convenience.


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