October Market Recap
Stocks trended slightly lower in October and the major US equity benchmarks finished in the red for the first time since April.
It had been five consecutive months of gains for the S&P 500, which bucked several trends this summer and is still up nearly 20% year-to-date. Investors who subscribed to the “Sell in May and Go Away” cliché were burned this year. As were those betting on significant volatility leading up to next week’s Presidential election. Financial markets have largely ignored the uncertainty created by a close Presidential race and most portfolios are better off because of it.
Only three of the 11 sectors in the S&P 500 recorded gains last month. Financials (+2.6%) and Communication Services (+1.8%) were among those pleasant exceptions. Health Care (-4.7%), Materials (-3.6%), and Real Estate (-3.4%) fell the most and represent three of the four worst-performing sectors this year.
Benchmark Returns: October 2024 | YTD 2024
|
Dow Jones
|
S&P 500
|
NASDAQ
|
-1.34% | +10.81%
|
-0.99% | +19.62%
|
-0.52% | +20.54%
|
|---|
The winning streak for stocks was nearly extended another month, but an ugly final day of trading produced some scary numbers on Halloween. The S&P 500 fell 1.9% on October 31 and the NASDAQ lost 2.8% (the equivalent of nearly 1,200 Dow points).
The volatility was driven in part by earnings reports from some of the largest US technology companies. Apple, Microsoft, Alphabet, Meta, and Amazon were among the companies to report earnings in the final week of October. Tech earnings were generally impressive but the forward-looking guidance in some cases was enough to trigger selling into month-end.
Earnings overall have come in close to expectations. More than 70% of S&P 500 companies have reported Q3 earnings with the blended earnings growth clocking in at 4.3% from a year earlier. It’s worth noting that Q3 expectations are low compared to future quarters. Analysts are calling for year-over-year growth of 13-15% in Q4 2024 and the first two quarters of 2025. Relatively speaking, even double-digit growth could be viewed as a disappointment. It’s something to keep in mind as we move ahead.
Bond yields also bucked a trend in October. The 10-year Treasury yield rose steadily last month and now yields 4.3%, the highest mark since early July. Yields had fallen as low as 3.6% in September. This indicates some lack of conviction that the Federal Reserve will reduce interest rates as quickly as was previously expected. There was no Fed meeting in October but two more gatherings are scheduled before year-end, including one on November 6-7.
The inflation story may not be over but the most recent chapters haven’t offered any plot-twists. The latest Consumer Price Index (CPI) rose 2.4% from a year earlier, the lowest we’ve seen in almost four years. Personal Consumption Expenditures (PCE) showed 2.1% inflation from a year ago. Both figures were mostly in-line with expectations.
US Gross Domestic Product (GDP) grew 2.8% annualized in the third quarter based on preliminary numbers released by the Commerce Department. In context, economic growth is down slightly from Q2 (3%) and from calendar year 2023 (2.9%). Still, it’s evidence we have likely achieved the “soft landing” and avoided a recession.
International equities fell sharply in October. Non-US Developed equities lost 5.3% and Emerging Market equities were down 3.1%.
Oil prices ended October close to where they began but not without some notable ebbs and flows. West Texas Intermediate Crude began the month around $70 per barrel and climbed above $76 before falling 12% and finishing at $69.50.
A final note that an imminent election does not necessarily imply imminent results. Given how close the Presidential race appears, it would not be surprising if it took days or even weeks to declare an official winner. Financial markets are aware of this as well. So, while some volatility is to be expected, investors should remind themselves that political gains or losses are not directly related to financial ones.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser. Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.
Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
