The S&P 500 could be on the way to make a record history by Monday should it record another losses. The longest streak was 9 consecutive losses when it happened in the 1980 when the index dropped by about 9%.
We are about to witness another pivotal moment in the history of the US market when they will announce a new President in just a couple more days. From an investor’s point of view, the last time we get this kind of nervy feeling was back during the historic Brexit event which occurred not too long ago. A tense and similarly eerie feeling is in the air should Trump manage to beat all the odds by winning over favorite Clinton.
This time round, the market was only down by about 3.5% and volume does seem low, which seems to indicate that only a certain portion of investors are cashing out in fear that something might happen. The long term investor seem to be holding on to what they have, knowing that regardless of who wins, it’ll be just another incident where either the Democrats or Republican takes office. The rest of the smart money seems like they are waiting on the sideline to see what event might takes place before putting their money into the market.
Ryan Detrick from LPL Financial drew out an interesting table about the after-event short term and long term effect of these consecutive losses.
Based on the table, the 3, 6 and 12 months effect after 9 consecutive losses are usually positive and they are positive by quite a bit, which indicates that it is usually short lived and investors might be in a better position to take advantage of such down market.
I am guessing this is simply a sign of a nervous but healthy market. Nervous and short term minded investors are heading for the exit while the long term investors are scooping the deals for the long haul. It seems like over the long term, there is only one direction where the market is heading, and that is up.