Per below, October was a really rough month for investors across virtually all asset classes: click to enlarge…
So what does that foretell for November?
The correct answer for you subscribers who happen to be our clients is “Who Cares!” We never ever, under any circumstances, make long-term allocation decisions based on short-term volatility.
Now, with commonsense out of the way, let’s take a look at what history would “predict”.
Here, from Gray and Vogel’s Quantitative Momentum, is a look at the compound annual growth rate for a portfolio that rebalances monthly into the previous month’s worst performing stocks versus one that rebalances into the previous month’s winners and the S&P 500 Index: click to enlarge…
Amazing! And, for the individual investor at large, counter-intuitive: Rolling a portfolio every month into the previous month’s losers absolutely blows away (or has throughout history) chasing last month’s winners, not to mention the broader market. I.e., history says November could be a very good month. But don’t hold me to it!
Meaningless for the patient long-term investor, but interesting enough to share.