Buying the Dip Takes a Hit

November 01, 2018

Historically, investors have attempted to capitalize from market drops by buying at the new lows in hopes that the stocks would rebound shortly thereafter. “Buying the dip” has generally proven effective ­— albeit by small margins — however 2018 has been an interesting exception. Notably, October’s steady trend downward has caused 2018 to flip into the red; through September, the “buy the dip” theory was still rewarded.

Our chart tracks data back nearly twenty years, through 1999, and throughout this data set the only other negative calendar years were 2000–2002. This suggests that currently, investors may be more leery of equity markets and less optimistic that the markets will rebound after a negative day. While investor sentiment certainly impacts the market, this is only a short-term bearish indicator. Midterm elections are right around the corner and historically the November of midterm election years has outperformed Novembers of other years, giving investors some optimism of what the end of 2018 may have in store for their portfolios.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.