October Market Recap
The losing streak for stocks has reached three months.
The S&P 500 fell 2.2% in October and reached official correction territory last Friday when the benchmark index closed more than 10% below its late-July high. Stocks did rebound from their lows in the final two days of the month.
While the S&P and NASDAQ still show attractive year-to-date returns, this latest selloff has left the Dow Jones Industrial Average slightly below where it began the year.
Ten of the 11 equity sectors finished October in the red. Energy (-6.1%) and Consumer Discretionary (-4.5%) fell the most. Only Utilities (+1.2%) were positive.
Benchmark Returns: October 2023 | YTD 2023
-1.36% | -0.28%
-2.20% | +9.23%
-2.78% | +22.78%
Although there were no changes to monetary policy in October (the Federal Reserve held interest rates steady at its November 1 meeting) the action in financial markets reflected the realization that rate cuts seem unlikely anytime soon.
Bond yields that rose steadily in September climbed even higher last month. The 10-year US Treasury yield moved within a decimal point of 5%, something that hasn’t occurred in 16 years. 10-year Treasuries ended the month yielding 4.88%.
A 7-year ladder of high-quality corporate bonds yields close to 6% annually. Municipal bonds offer even better taxable-equivalent yields for investors in the highest income tax brackets. The more yields rise, the more competition bonds present to equities, especially in an environment where real yields are positive (higher than inflation).
The most recent inflation reports were steady: Both the Consumer Price Index (CPI +3.7%) and Personal Consumption Expenditures (PCE +3.4%) showed the same year-over-year increases as a month earlier. That said, inflation has accelerated from its summer lows, which fuels the argument that the Fed will keep rates higher for longer.
A resilient US economy grew stronger in recent months. GDP grew by a better-than-expected 4.9% in the third quarter. That’s more than double the growth in Q2 (2.1%) and the fastest pace since 2021. Consumer spending, which accounts for nearly 70% of US GDP, and increased government spending were major contributors. Most economists, however, expect economic growth to slow considerably in the coming months.
Employment data has been equally strong. The latest numbers showed 336,000 new jobs created in September, nearly double consensus expectations. And revisions to the July and August employment reports showed 119,000 more jobs created in those months than had been previously reported. The unemployment rate held steady at 3.8%. Wages have grown 4.2% in the last 12 months (slightly outpacing inflation).
As stock prices have worsened, so has investor sentiment. One “Fear and Greed” index suggests pessimism is similar to levels in October 2022, when equities bottomed. Some of that concern is based on non-economic forces.
The US House of Representatives elected a new Speaker, but the 45-day funding bill passed by Congress a month ago expires on November 17, meaning a potential government shutdown still looms.
America also finds itself involved in another foreign conflict following the terrorist attacks against Israeli civilians on October 7. More than 1,400 people were killed (including at least 32 Americans) and another 200 taken hostage. The attacks, which many Israelis have referred to as “our 9/11,” triggered another war in the Middle East.
Small-cap stocks suffered through another brutal month. The Russell 2000 index lost 6.9% in October and has fallen 17% since the end of July.
West Texas Intermediate Crude oil finished October just below $81 per barrel, down 11% from a month earlier. Gold prices increased 7.4%.
Americans collecting social security will be interested to learn those benefits will increase 3.2% in January. This Cost of Living Adjustment is considerably less than the last two years (5.9% in 2022 and 8.7% in 2023).
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.