One of the finest traditions on Wall Street is October ripping the hearts out of as many bulls and bears as possible. On that front 2014 will go down as a banner year no matter what happens between now and the close on Friday.
With yesterday's 1.2% rally the S&P 500 is now positive for October. That's right, positive. Since hitting 1,820 on the morning of the 15th the S&P500 has ripped 165 points or 9% in a straight line. The move has everyone groping for a reason. Technicians will point to support holding and buyers coming in when the S&P500 approached "correction" levels. Fundamentally inclined investors are claiming earnings were better than expected.
Of course perma-Bears hate all of this. They'll note, correctly, that earnings are growing more than two times the rate of revenue increases. That's unsustainable and has been for as long as anyone can remember. It should also be mentioned October isn't over yet. Later today the Fed is expected to announce the end of Quantitative Easing and tomorrow brings the latest absurdly rough estimate of GDP for Q3.
I'd put forth a slightly different idea. The worst case scenario didn't unfold. Hong Kong hasn't become a shooting war, Ebola isn't (yet) in our pre-schools and we seem to have avoided another Great Depression, at least for now.
I'm not going to claim to have caught every nuance and anyone who does is a liar. Still, I've got two takeaways as we preview the end of the month:
1. Most of us shouldn't trade stocks based off headlines. It's a suckers game.
2. Whenever the conventional wisdom says the sky is falling take the other side.
Beyond that I've got one final proposal. Next year let's agree to just take this month off entirely, shall we?
