The market sell-off last week reminded investors that October can be spooky, and Halloween is still weeks away.
From Wednesday to Friday, the S&P 500 hit fresh lows, dropping 5% in hours, with most stock averages down 4% after the rocking and rolling week.
Remember, Wall Street traders are particularly nervous in October. Unprecedented drops in the stock market tend to occur during the month, including the crashes of 1929 and 1987, signaling epic, disastrous economic downturns.
The fear last week was palpable. Across Wall Street, talking heads pointed to rising interest rates and bond yields as the cause for investor panic. Throw in real anxiety about a looming trade war with China, and the sell-off turned into pandemonium.
Ever glib, retail stockbrokers were armed with clichés to calm their nervous clients.
Customers were told to “buy the dips” or “stay the course.” The market selloff was a “healthy shakeout.”
Such refrains were cold comfort to customers whose brokers loaded them up with heavy equity positions in FAANG stocks: Facebook, Amazon, Apple, Netflix and Alphabet, formerly Google.
Also, in the cross hairs are investors whose brokers sold them opaque, high-risk structured products or told them to use margin.
What many brokers and customers have failed to realize is that the only way to sleep peacefully at night and avoid investment fraud, even when the market is churning, is to follow investment rule number one: diversify and follow an asset allocation strategy.
Even though Wednesday got off to a bad start, the overall market is up so far this week. Banks have reported good earnings, and the S&P 500 rose more than 2% on Tuesday. But who knows what the rest of the week will bring? Wall Street could easily hit the sell button if the Fed signals a more aggressive stance or the trade war with China escalates.
Take heed and have a conversation with your investment adviser. The only good reason for a fright this October is Halloween.
Zamansky LLC is a New York law firm which represents investors in court and arbitration cases against securities brokerage firms and issuers. The firm may represent investors in cases against companies mentioned in this blog. Zamansky LLC also represents investors in arbitration cases against UBS and other brokerage firms regarding Puerto Rico bonds and UBS closed end bond funds and other investments. https://www.puertoricobondfundsattorney.com/en/