Kiss that Sucker Goodbye

Well the third quarter is done—good riddance! It has been a wildly volatile roller coaster ride these past 90 days. But it was September that really did the bulk of the damage—I guess we shouldn’t be surprised -- 4 of the worst 25 percentage-loss days for the S&P 500 over the last 50 years occurred during September 2008, including Monday’s drop of 8.6%. (source: BTN Research).

Thankfully we ended on a more positive note yesterday, with all of the major stock indexes recovering ground lost on Monday, but still, stock market performance for the three months of July, August and September was rough. The S&P 500 rose 5.3% yesterday to 1164.74, but still finished the quarter with a 9% loss. The Dow got off to a strong start and saw its gains accelerate as the closing bell approached, marking the end of 2008's third period. The 30-stocks index soared 485.21 points, or 4.7%, to close at 10850.66, off 4.4% for the quarter. The Nasdaq Composite Index was up 5% to end at 2082.33, off 9.2% for the quarter.

If those losses did not catch your attention, perhaps the news cycle did. Let’s review what has occurred in the 30 days of September:

1) On September 7th, the US took over the reins at Fannie Mae and Freddie Mac, agreeing to inject up to $100 billion into each company.
2) On September 14th, 158-year-old Lehman Brothers filed for bankruptcy.
3) On September 15th, Bank of America bought Merrill Lynch in a $50 billion emergency acquisition.
4) On September 17th, the US Treasury extended an $85 billion loan to AIG
5) On September 18th, markets were in freefall before news leaked out of potential $700 billion government package to purchase distressed mortgage-backed assets from various financial institutions.
6) On September 25th, Washington Mutual was seized by federal regulators and sold to JP Morgan Chase & Co.
7) On September 29th, Citigroup purchased Wachovia
8) On September 29th, the House of Representatives voted against “TARP” and sent global stock indexes down by 4-9%

Ladies and Gentleman, I do not know about you, but I sure am ready to kiss this month, not to mention the whole quarter, goodbye and to turn over the calendar page to (gasp) October. Yes, I know October can be scary and you may even be tempted to pull the trigger and make a rash decision to sell everything in your portfolio and go to cash, but this very act may be among the most dangerous decisions you could make. Clearly these are trying times that test every investor from Main Street to Wall Street, but remember if you bailed out in at the bottom of the last stock market bottom (October 2002), you may have missed the bounce from 2003-2007, when stocks returned 12.8% annually. It’s hard to stomach, but this is part of the process.