We’ve all seen the sobering numbers on things like unemployment (9.1%), GDP (1.3%) and the national debt ($15 trillion). Now comes another reality check: Last quarter, not a single U.S. diversified stock fund made money. Not one.
Talk about a rough three months. We had the debt ceiling fiasco in Washington, a new financial crisis in Europe, and renewed talk of a double-dip recession. Amid all that, the July-through-September period featured some of the wildest market swings on record. In the 46 trading days since the beginning of August, the S&P 500 has seen 29 swings of 1% or more, the Wall Street Journal reports. This wouldn’t be so bad if the up days were as sharp or as numerous as the down days. But that wasn’t the case. The S&P 500 fell 14% in the period.
That’s a big drop. Still, you’d think that at least one sharp-eyed fund manager would have owned enough winners to eke out a gain. Didn’t anybody load up on Apple (up 14%) or Duke Energy (up 8.5%)? Evidently not. The abysmal results, reported by TheStreet.com, were confirmed by fund tracker Morningstar, which says such a universal decline has not happened in at least 10 years.
Certainly, making money in the quarter was difficult. The average diversified stock fund was down 18%; narrowly focused “sector” funds were down 17%; balanced funds dropped 11%; international funds fell 20%; even taxable bond funds fell 1%. The lone broad category winner: municipal bonds, which rose 3%.
Contrarian investors say the combination of record volatility and terrible fund results is a great sign; it means that all the nervous money has been washed out of the market. If they are right, the next move will be up. Even if you’re not buying that twisted logic, for long-term investors this is probably not a good time to flee the market. You’ll only lock in the losses. And with no crystal ball, how will you know when to get back in?