A Window of Opportunity
Global markets are up almost 10% year-to-date, leaving some investors to feel like they have missed the boat and maybe it is too late to invest. But opportunity’s knocking during this season for several reasons —
Market seasonality support more rallying
Since 1987, global stocks had historically experienced its best monthly returns from October to December. The months of November and December has had the largest mean monthly return of +3.23%. October to November has had the highest probability of earning a positive return in 78% of the instances.
Conversely, August and September have been the worst months in terms of mean monthly declines, on average declining -2.04%. If markets do experience a pullback, that would represent an opportunity for investors to deploy capital in these seasonally weak months.
2. Market tends to rally when the election winner becomes clear
Trump’s expanding lead in the polls has helped with election uncertainty, whether this gets challenged remains to be seen. On average, markets tend to rally strongly into the end of the presidential election year as it becomes clear who is going to win the election.
3. Stocks tend to rally after the first rate cut
On average, the stock market has rallied 14.5% in the year of the first rate cut. Not all easing cycles are the same. During slow rate cut cycles(four or fewer cuts in a year), stock markets tend to rally more strongly. Based on economic projections from the Federal Open Market Committee as of June 12, 2024, the expectation is for 1 rate cut in 2024 and 4 rate cuts in 2025.
While nobody knows the future with any certainty, whether the Federal Reserve will be cutting rates or whether Trump wins the election, or markets will follow its seasonal patterns, the historical patterns provide a useful guidepost. At this juncture, the path of least resistance for markets is higher.
However, if market conditions do change, we are guided by our objective market Risk Matrix that helps signal to us when market risk rises and the probability of a bear market is high, in such instance, we are able to conserve capital for our clients and protect their capital.
So rest easy and, Simply Invest.
There is a better way to invest
Experience the difference today with a wealth manager that is aligned with your interests.
GYC applies the best ideas from financial science to develop a financial plan that is built upon a rigorously tested investment philosophy.