Stock performance was mixed last week as investors considered the impact of interest rates, international affairs and corporate earnings.
While the final weekly results showed relatively little growth or loss, the week included some volatility. So far, domestic indexes have struggled this month. As of October 19, the S&P 500 and Dow had each lost more than 3% for the month, and the NASDAQ was down 7%.
As we have often discussed in our market updates, volatility may feel uncomfortable, but market fluctuations are normal. That perspective becomes especially relevant in October, which is considered the most volatile month for markets.
Examining October History
Historical performance can’t predict future results. However, we do believe that understanding what makes October unique can help provide context for the current environment.
• Significant market events
For generations, many of the most significant market events have taken place in October, including the crash of 1929 and multiple large drops in 2008. In addition, last Friday, October 19, marked the 31st anniversary of the “Bloody Monday” market crash. On that date in 1987, the S&P 500 lost over 20% of its value.
• Higher than normal volatility
Since 1950, the S&P 500 has experienced more 1% moves in October than any other month. The month has also been the Dow’s most volatile since its beginning in 1896.
• Surprising performance
Despite the large events and high volatility that October can bring, its results may be stronger than expected. For the past 20 years, October has had the strongest performance of any month.
Exactly how this month will end remains to be seen, as we still have a few trading days left. I hope that understanding how much markets often move in October will help you ride out any future volatility with more confidence. Over 1,000 companies report earnings this week. This should also help us further gauge how the economy is doing and what areas are participating.
Keep in mind we are also in the midst of one of the most divisive mid term elections I can remember. This election wields a particularly large amount of uncertainty with it. The market doesn’t like uncertainty and I suspect much of this volatility will remain until after November 6. Of course, we’re also here to provide any answers or information you need, so contact us any time.
Wednesday: New Home Sales
Thursday: Durable Goods Orders, Jobless Claims
Friday: GDP, Consumer Sentiment
This day in history:
In a televised speech of extraordinary gravity, President John F. Kennedy announces that U.S. spy planes have discovered Soviet missile bases in Cuba. These missile sites—under construction but nearing completion—housed medium-range missiles capable of striking a number of major cities in the United States, including Washington, D.C. Kennedy announced that he was ordering a naval “quarantine” of Cuba to prevent Soviet ships from transporting any more offensive weapons to the island and explained that the United States would not tolerate the existence of the missile sites currently in place. The president made it clear that America would not stop short of military action to end what he called a “clandestine, reckless, and provocative threat to world peace.”
Quote of the week:
“If your ship doesn’t come in, swim out to meet it!”
— Jonathan Winters
PUBLISHED BY NICK TOADVINE