I’ve just updated my Keeping Score (ii) page for S&P performance in October. The short version is that the month was “all IT, all the time.”
Put a different way, companies whose profits are most closely tied to the performance of the US economy seem to have fared the worst–especially so if they have significant physical assets in the United States–and global companies with chiefly intangible assets like software have done the best. This is a typical pattern for emerging markets, where the current generation sacrifices its well-being and earning power to secure a better future for the next generation. The present Washington twist on this theme is that the ostensible goal is to achieve wealth gains for ultra-rich political donors. Whatever the motivation, the important idea for us as investors is that there’s no hint that anything is going to change in the near future.
It’s also interesting, I think, but I’m not sure how important, that the typical seasonal dip in the stock market that we’ve seen in September-October for decades didn’t occur this year. I’m attributing this to the declining importance of traditional mutual funds and their replacement by ETFs, which don’t have the end-of-fiscal-year tax issues that characterize mutual funds.
Back in the pre-mutual fund days, the income tax-related downward market pressure came in December as banks and insurance companies did their tax planning. Even in my early career, however, that phenomenon was not so important. My guess is that we may notice some downward pressure from this source, but nothing significant.