By Jeff Mack
Unless you spent the last few weeks in a Halloween candy coma you probably already know the stock market has been on a tear. Since the lows of October 15 the S&P 500 (^GSPC) is up just under 11%. It was the biggest two week rally since 2011 and October's reversal was among the most dramatic in the last century.
For the year the S&P 500 is up 9.2%. That's about double the return of the average mutual fund. And hedge funds? Forget about it! According the the best available data from that still murky industry the average buy-side shop is lucky to be breaking even this year.
If you're a long term index investor this doesn't matter to you, but I can personally guarantee anyone running money professionally is starting to feel like a fraternity hazing victim right now. If you're running a hedge fund that's flat for the year you've got less than two months to save your job. Unless you're one if those 10-20 huge brand names like Ackman or Einhorn your investors are going to take away the money unless you kick it into gear in a huge way starting now.
Historically speaking the only way to catch up is going to be chasing stocks higher. November, December and January are stronger than any other three month period. Since 1928 those months have nearly doubled the performance of any other period.
Oh yeah, there are also midterm elections which, for whatever reason, have a tendency to absolutely light a fire under stocks.
None of this is an excuse to chase. As we say so often around here, most people shouldn't be trading much, if at all. The point is simply that stocks being expensive and "due for a pullback" aren't really trading catalysts. They're excuses. For what it's worth I made exactly one trade last week: I added to my Facebook (FB) long position on the post-earnings sell-off. That's not advice, it's a disclosure. My advice is simply this: buckle up into this week and beyond. After a wild October the safest stock bet right now is that things are about to get deeply weird.
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