Wednesday, October 01, 2008

Third Quarter Roundup

Third quarter was pretty ugly, across the board. The S&P 500 declined -9.0%, which was relatively less of a decline than most markets across the globe.

Here is how the major indexes stood for the year, as of 9/30:
  • S&P 500: -20.7%; Nasdaq 100: -24.0%; Russell 2000: -11.3%
  • China: -56.4%; Japan: -26.4%; Brazil: -22.5%
  • The dollar spiked +11.7% during Q3, and is +3.4% for the year
  • Oil tanked -28.1% during Q3, and is only +4.9% on the year currently

Off all the mutual funds in the universe that I follow for our firm, only ONE remains in positive territory for the year: Rydex Managed Futures (+0.3%).

Many of the growth funds and International funds in our universe are down between -25% to -40%. Legg Mason Opportunity Fund is down -41.15%. Ouch.

Amongst the sector ETFs I follow, the biotech ETF (XBI) is still up +2.45% for the year, but most others are down. The leading commodity ETF (DBC) lost -24.39% during Q3. The metals and mining ETF (XME) lost -50.3%. Talk about brutal declines.

Even bond funds fared poorly. My #1 bond fund, Loomis Sayles Bond (LSBDX) lost -13.1% last quarter. Our PIMCO Developing Markets fund (PLMDX) lost -8.52% for the quarter.

All of the bond funds I follow are down for the year. From corporate bonds to global, munis to high yield, they are down across the board. That is painful, since the reason you own bond funds is to provide ballast from the storm. Not this year.

Markets almost never go down in a straight line. Big picture, I think it is likely that we will see a relief rally in Q4. The question will be one of timing. Will the market bottom in October? Or maybe after the election?

The bank stocks did not make a lower low during the recent panic selloff. This could be a meaningful signal, and I am watching these financial stocks rally today even in the face of broad market weakness. I am still sitting on my large cash balances for now, but looking closely for entry points.

long SDS


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