Growing up on a farm, we were always conscience of the coming season. The change would come whether we liked it or not (never big fan of the dark months ..Feeding the Cows in the dark, Ice Storms, Sleet, Brrr) but we knew they would eventually come and if we did not like the coming season it would eventually work its way through on to the next season.
This was tracked by The Farmers Almanac!
Of course we never knew just exactly when, how bad … and sometimes it would even seem like it was not coming, but it would… frequently of differing severity, but at the absolute least rhyming with the season from the prior year.
Just like Summer, led to fall and fall to Winter and so on…. believe it or not, Capital Markets have seasonality too!
The Traders Almanac
Not living on a farm anymore, and having a fun occupation that entails Capital Markets, it is worth noting of the Seasonality of Capital Markets….
According to the Traders Almanac October followed closely by September are the worst two months of the year…. among many other seasonal patterns…
- Mutual Fund End of the Year Occurs during this period
- Public Company Final Quarter projections confession
- Lack of Cash Flows Due to Nearing the End of the year
- Black Out Periods of Buybacks due to earnings season
- Religious Holidays
- Quadruple Witching (Expiration of 4 Different Options Type contracts) One of largest ever last Friday
Any or all could be the reason some or maybe none…..
Pair this with extended valuations which we have been beating you with and maybe a FOMC that is sending smoke signals of tapering asset purchases….
It may be bumpy for a while….
But guess what?
Just like knowing on the farm that in December the days began getting longer, November and December are “Seasonally” the best months of the year for Capital Markets …. of course there are exceptions (2018) …
Stay buckled, we have you covered but there may be some turbulence if seasonality holds!
Have a Great “Farmers/Traders Almanac” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
$treet-¢ents 
Q 3 2021 Review – Let the Taper Begin, Interest Rates, Bumpy Season
Let the Taper Begin
In late 2018 the FOMC learned a valuable lesson that they are intent on not repeating. At their most recent FOMC meeting Jerome Powell, chair, made it very clear that the large monthly asset purchases, $120 billion to be exact, will begin to be tapered. Powell also made it very clear that the eventual raising of interest rates would not occur until the taper was complete unlike the events of 2018 in which the FOMC tapered and increased short-term interest rates at the same time, much to market participants dismay.
Bottom line if all goes well scheduled monthly asset purchases will be trimmed and eventually reach zero sometime next year.
Interest Rates
The most widely followed interest rate, the 10-year US treasury, after having a startling move earlier this year from under 1% to over 1.7% dropped back down to the low 1.2% during the most recent slowdown due to the variant.
Whether Powell’s comments, or the turning of the variant, interest rates have taken note and moved up smartly to over 1.5% beginning the normalization of higher interest rates which is very good long-term for the financial system
Kyle Bass Predictions
In our Q4 Newsletter we noted some very positive predictions from local financial mogul Kyle Bass, namely oil reaching $100 a barrel before the year end and continued Federal Reserve protection along with a push through to the end of the variant.
Hopefully all of these predictions come true.
The Worst of Times the Best of Times
September and October tend to be the most challenging months for Capital Markets mostly due to large institutions, think Fidelity as an example, closing their books on the year which make for more volatile times. So far, this theme seems to have played true.
The good news is notwithstanding our 2018 example from above, November and December tend to be some of the better months of the calendar.
As we head to the end of the year, we will be watching all of these and many other things very closely and will be communicating live on our blog at street-cents.
Sincerely,
John A. Kvale CFA, CFP
Founder J.K. Financial, Inc.
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Posted in Clients/Clients Only, Economy, FOMC, Interest Rates, Investing/Financial Planning, Market Comments, Performance Report Cover Letter
Tagged Cover Letter, Interest Rates, Kyle Bass, Seasonality