Every Other Month Theory
Virtual every business, contractor, sales person that I deal with say that every other month is slow. It is very frustrating to have a fairly good month (compared to the end of last year and the month of February) then have a bad month. It’s up then down, not just up and down but, up enough to think things are really good and just as you thinking things are good, the rug gets pulled out and it’s the end of the world all over again. I can not express how hard it is to plan for the future when the direction changes 180 degrees every 30 days.
I have a theory on why the oscillation is the way it is.
First I’ll state the obvious, there is a great deal of uncertainty over the economy. There is a great deal of fear that more people will loose their jobs, loose medical benefits, loose retainment investments and things will be even more difficulty in the months to come. But at the same time "when the economy recovers" is head every day, so obviously there is the presumption that things will improve.
People are looking at the stock market as an indicator of how the economy is doing and at the same time the stock market is looking at the consumers and business to see if we are improving.
So if the consumer spends more when the market goes up, and the market goes up when the consumer spends more why does it change every other month?
When people get their investment (401k) statement at the beginning of the month it has an effect on how they feel. If it is good they might spend just a little more. You may deny it but you know your going to buy an extra Strabucks Coffee or give your kids an extra 20 bucks. If the 401k statement is bad you might just hold off on a purchase.
My theory is that the statement that is mailed the 1st of the month effects that month. And the stock market is not effected until that month is tallied up.
The stock market gets the reports on how businesses did not on how they are doing. These reports come out on the 7th through 21st of the following month. In May the market was up, this lead to June being good for the retailers, contractors, and sales people. June the market ended down, the retailers, contractors and sales people all had a bad July but the market was up because of the June the sales were good from the Market moving up in May. So when Wall Street finds out the July was bad for retailers (after the 7th) then the market would move down. But the consumers will get an investment statement that shows a nice increase in their 401k and will spend more. So the Market goes down for August even though I expect a good sales month for August.
So if the market goes down after the 7th next month and your local coffee shop has a good month, (even if the market is moving lower) you’ll know why.
The good thing is if this cycle continues then October would be down, This is important and I will tell you why some other time but for now just make sure you have money to invest around that time.