With Q3 in the book, and September having managed to escape the curse, Mike O’Rourke of BTIG has some good observations about the challenge facing money managers right now:
A big question on most investors’ minds is whether performance anxiety will force managers to chase if this market stages a breakout in Q4. At this point, the S&P 500 is only up 2.3% year to date. Anyone who did not participate in the Q3 rally likely did not get hurt in Q2 either so they probably still look good from a year to date vantage point. Should the market break lower, players can remain on the sidelines without exposure which will lead to outperformance. Aggressive shorting will be challenging if earnings hold up at current multiples and the looming risk of the Fed printing is always out there. If a decisive breakout above 1150 materialises, chasing Equities may be one of the toughest decisions managers have to make in 2010. After 9 months of going sideways, Q4 is set up to be the make or break quarter for 2010.