In this video, we are doing a thought-provoking risk management exercise. We know that historically, the S&P 500 tends to have positive performance in the fourth quarter, with October, November, and December often being good months. This has become the general “base case” that many people expect. However, our point is that too many market participants think linearly, just expecting the rally to continue, and they aren’t positioned for the possibility that the fourth quarter might not deliver. What if we get a sideways move with some chop, or even a decline? Our main takeaway is that investors should engage in good risk management right now by creating a preemptive plan. This means asking, “What if the expected rally doesn’t materialize?” and taking steps like considering hedges or diversification to prepare for that scenario. Ultimately, we want to be awere of market complacency.
