Stocks: October Jitters

I receive emails and IMs from friends who are predicting an October swoon, to be followed by a big rally into the end of the year. In addition, the seasonal investors are predicting a bottom in October-November, to be followed by a rally. My concern, is that if everyone is on the same page, will the market throw the masses a bone and cooperate? Will the market do what everyone is expecting it to do? Rarely does the market give-in to the demands of the crowd. The market likes to ying when everyone is expecting a yang.

There are more theories out there that deserve attention and that I mentioned earlier. That is the presidential year cycle where the market rallies to the election, then falls back or moves sideways in the months following. The administration tries to game the markets ahead of the election by spending tons of money, and manufacture positive sentiment among voters. There is also the theory that the stock market performs poorly in the early part of the decade, and rallies in the latter half of the decade. If so, we could be heading for the sweet spot.

I do like the seasonality angle in general. I don't think one can say that the bottom always happens in October. Maybe it's September or November, just to keep folks guessing.

I'm feeling fairly optimistic about the market. I could be wrong, but I think the market has held up fairly well in the face of terrorism, uncertainty in Iraq, high oil prices, a heated political race, and an economy that's cooled off (but still growing slowly).