Severe thunderstorms took away the opportunity for me to watch Stevie Wonder perform at the New Orleans Jazz and Heritage Festival in April of 2016. Recently, attending this festival has become my favorite annual trip to take with my friends. I owe it all to my friend Amanda who introduced me to this awesome event and city. It is a great weekend filled with soulful music and comforting food. The hardest decisions to make that weekend are who to see and which dish to eat. However, when we saw that Stevie Wonder was headlining one of the three major stages there was no questioning it. He was THE one act we were flying out to see. We were so excited that day waiting for Stevie as we braved the elements at the outdoor fairgrounds with ponchos that didn't seem to work, mud filled shoes, and ear-shattering thunder in the background. You can only imagine the emotional let down we had when they made the announcement of canceling the festival for the rest of the day due to storm system coming in. "But Stevie has not performed yet!" Not even my shrimp etouffee could snap me out of it.
What does this have to do with the financial markets? One of my favorite roles for our clients is to allocate their investments appropriately given their unique situation and time horizon. With that being said, I read a lot of research. One of my most trusted sources is the team at LPL Research. They do a phenomenal job of providing daily updates, opinions on market outlook, and charting historical trends. A very recent piece (August 10th, 2017) is pictured below:
Going back to 1907, the chart shows how years ending in 7 have a peak around this time of year for the Dow Jones Industrial Average. Granted we are only looking at 12 occurrences (1907, 1917, 1927...) it makes you question the ability of 7 being a lucky number for the Dow. Seasonality should not be your main component in determining your investment philosophy and strategy. However, when you see information like this it catches your eye .... or at least mine.
I posted a few weeks ago (thanks to our Research team) that August and September have historically performed poorly for the S&P 500 since 1980. This information really speaks to my superstitious side. In my time as an athlete, no matter the sport I was very superstitious and it has been with me ever since. From the way I approached my free throws in basketball, to the shirt I wore under my football pads, or the warm up song I listened to before a rugby match. All of it was non-negotiable and I could not jeopardize the mojo of performance by not following through. I know I am not alone here. There so many known superstitions out there from Michael Jordan to Wade Boggs. You can even think of the ones you have, athlete or not.
Land the plane Victor. I am not writer but was inspired with the thought to incorporate some of my largest passions: sports, music, and financial markets. So as I debated if I would write or not, we experienced the second largest decline of the year in the S&P 500 yesterday. It was a sign! I had to write. So now what? As fun as this was meant to be, it is critical to know your investment objectives and time horizon. It is difficult to think long-term with so many short-term events that happen. It is easy to find data that can reinforce your thoughts or data to discredit others. Rather you are a do-it-yourself-er or collaborate with an investment advisor, the key is to put together a plan, set clear expectations, know what you have and why. Superstition may not be the best investment strategy - but it is a hell of a song.
Photo: Stevie Wonder Superstition by Diane Baren
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Not strategy assures success or protects against loss.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The S&P 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.