October’s deck is stacked against stocks

The FANG stocks are losing a little altitude as Sept. come to a close.

The high-flying tech giants — Facebook, Amazon, Apple, Netflix and Google — have all seen roughly 5 percent pullback from recent highs. Apple is close to 10% down.

While the Dow Jones industrial average and S&P 500 indices have been treading water over the last 7 trading days, the Nasdaq is down 1.2% over that same time frame. This comes after a summer of almost daily all-time highs on the exchanges.

Profit taking best explains the pullback, but the Street is trying to come up with alternative scenarios for each stock so as now to induce a broader sell off.

FB is embroiled in the Russian campaign ad story, while Apple will have problems selling iPhone 8s. Netflix is facing competition from Disney and Fox and Google is mired in European regulation squabble with huge fines pending.

This tack may contain a broader selloff for the time being, but not for long, I believe.

October has always been a difficult month for equities. Yes many crashes and pull backs have occurred. This really dates back to the 1880’s as liquidity dried up in the east after western farmers sold their products in the east off of the summer crops.

Janet Yellen and the Federal Reserve didn’t think last week was a good time to tighten liquidity as they passed on raising rates.

Today we are left with history of the 1929, 1987 and of course 2008 crashes, as the largest sell offs in history in the early fall.

So what to make of today? Well we’ve had an impressive run up based on nothing more than equities being the best source of return in this economy. Fundamentals can be thrown out because much of the earnings per share growth is a result of share buybacks by corporations.

To say the foundation of this market is iffy would not be out of the question, however you must answer this question.

Where will your money be treated better? Bonds? No. Bitcoin? Perhaps, but most people like to be able to sleep at night. Art and land? Well perhaps for diversification purposes, but both are tied to the wealth effect created by stocks.

So just as no chart goes straight up, moving from left to right, this market too will have its setback. Will it be October? Can’t say with any certainty, but the deck could be stacked against stocks.

Quick Update on markets Tuesday Sept. 25:

  • Facebook: 162.87
  • Apple: 150.55
  • Amazon: 939.79
  • Netflix: 178.55
  • Google: 934.28
  • Dow Jones: 22,296.09
  • S&P 500: 2,496.66
  • Nasdaq: 6,370.59
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One thought on “October’s deck is stacked against stocks

  1. Pingback: October’s deck is stacked against stocks via /r/economy | Chet Wang

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