September the Cruelest Month? By Lewis J. Walker, CFP(R)

September has a rap for being unkind to stock investors. But the theories as to why don’t hold water when it comes to consistent examples of causation or correlation. The best explanation for this September’s ups-and-downs may be the GEICO “It’s what you do” ad campaign. If you are Mr. Stock Market, “you fluctuate, it’s what you do!”

On September 1, 2015, the SPDR S&P 500 ETF (SPY) closed at 191.72. As this scribe traveled in Europe from 9/3 to 9/25, enjoying the fruits of a strong dollar versus the euro, I watched markets vacillate. On 9/25, the day I deplaned after a long flight, SPY closed at 192.85. Despite turmoil in between, not much change, really. The market fluctuated. It’s what it does!

Data shows the average stock market investor to be very bearish! Often a dour mood is taken as a bullish sign by some, that bargains await. Like trying to time markets on September’s bad reputation, extremes in pessimism do not mean that markets could not go lower. Reading the European papers as one travels adds perspective. We live in a difficult world. We always have, but we are fortunate to live in the USA. Where else would you want to reside, work, raise a family, and invest?

The migrant challenge is overwhelming parts of Europe. The pictures are heartbreaking. In Europe the stampede primarily is about safety as war and terrorism plague parts of the Middle East and North Africa. America’s illegal immigration situation dominating 2016 election rhetoric primarily is about economic opportunity. For millions around the globe “anywhere but here” is behind the greatest mass migration in history.

In London for a few days before boarding a cruise ship, Southampton to Rome, my wife and I stayed at a hotel on Buckingham Palace Road by Buckingham Palace. Over lunch with an old friend, a financial advisor experienced in international dealings, I remarked on the high number of construction cranes in the area. Near my hotel alone, a number of buildings were under construction or being extensively remodeled—a boutique hotel, office buildings, condo residences and apartments. London is booming and much of it is “flight money,” observed my friend. Money is pouring out of the Middle East and unstable areas in Africa, as well as strained economies such as Greece.

People vote with their feet and money goes where it is best treated. Taxes matter, but even more important is political stability, the rule of law, a dependable currency, and investment opportunity. The U.S. dollar is a safe haven currency, as is the British pound and the euro to lesser degrees. When uncertainty and chaos loom, flight money finds its way to places like America, Britain, and Germany.

Expect the bull market in the U.S. greenback to continue. Not wanting to see a stronger dollar is one reason Janet Yellen and the Federal Reserve Bank did not raise interest rates on September 17th. Low interest rates in the U.S. will persist for some time. Savers will continue to see guaranteed yields that are negative adjusted for inflation and taxation. The quest to generate positive returns and cash flows within one’s individual risk tolerance will continue to dominate conversations between clients and advisers.

On September 25, the S&P 500 index closed at 1,931.34, 9.52% below its 52-week record high of 2,134.72 set in May, 2015. We have had our 10% correction. While there always is a possibility of the low being re-tested, the benchmark index on 9/25 was +6.08% above its 52-week low of 1,820.66. Take that as a positive!

Stocks have a place in a diversified portfolio. The dividend yield on the SPDR S&P 500 ETF on 9/25 was 2.14%. Yes, stock prices fluctuate but dividends count and compare well to low, albeit guaranteed, money market and CD yields.

Reading the papers makes one wonder why the markets aren’t worse off than they are. That they are not is an uplifting sign. If you own even one share of stock, a small piece of corporate America...if you live in a nice house not in danger of a bomb attack...if you can worship in the spiritual home of your choice...you are better off than billions of your fellow travelers on Spaceship Earth.

Pope Francis reminded us of how blessed we are. We are indeed!

Lewis Walker is President of Walker Capital Management, LLC. Certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with Walker Capital Management, LLC. lewisw@theinvestmentcoach.com