Don’t Run From the Bear

My friend, Allan Roth, wrote a great article about the bear market in the latest issue of Index Universe. I particularly like this quote from the article (emphasis mine):

At least I know that I don’t know what the market holds for us during the next six months. But, there are some things I know. First, I know that the market is a 17 percent better buy today than it was at its height during October 2007. A strong argument if ever I heard one that now is the time to start buying.

While this is a very logical argument, it falls on deaf ears when it comes to human behavior.

He then went on to illustrate his point with this interesting graphic showing equity mutual fund flows:

If there was ever proof that people do the opposite of what they should do, this is it. Instead of running from the bear [market], people should stare it down and call it’s bluff. Eventually things will turn around. Just rejoice at the marvelous big sale that’s going on right now in the market.

We’re Looking at the Second Worst June in S&P History

As of Friday’s close, the S&P 500 Index is down 8.55% on a total return basis for the month of June. If things don’t improve during Monday’s trading, this June’s performance will be the worst June performance in S&P 500 Index history and the second worst in the S&P Index’s history. Remember, the S&P Index didn’t become the S&P 500 Index until 1957. Prior to 1957 it was composed of 90 stocks. Anyway, here’s a ranking of the ten worst Junes in the history of the S&P Index:

Although this June isn’t nearly as dismal as 1930’s -16.15%, it is still pretty bad compared to the other worst returns for June. However, take heart. This June’s pitiful performance is the 38th worst monthly performance of all months going back to 1926. In other words, it could have been a lot worse!

Oh, and in case you’re interested, Standard & Poor’s has a pretty cool performance tool that you can use to lookup the historical returns for the index. You can access it here. All you have to do is fill in the date and the table furnish you with the return for the index up to that point. Just be sure to use the TR or total return numbers if you’re using the index as a benchmark. It’s pretty cool tool. I use it all the time.