Hello all - we hope your October was a nice one.
It was a rough month for the indexes. The Dow was actually up 1.7%, but the S&P lost 0.9%, and the Nasdaq, which has a higher concentration of tech stocks, had its worst month since March of 2025 with a drop of 5.3%.
It was a rough month for the indexes. The Dow was actually up 1.7%, but the S&P lost 0.9%, and the Nasdaq, which has a higher concentration of tech stocks, had its worst month since March of 2025 with a drop of 5.3%.
Here’s a look at how the markets moved this month:
Here’s a look at how the various market sectors performed this month. We’ll note that the “Communications Services” sector that performed the worst this month includes names like Google, Facebook, and Netflix.
Here’s a look at all the performance of all the stocks in the S&P 500 for the past month.
The astute reader will notice that there are a lot of green, positive stocks and sectors this month - yet the indexes did very poorly. That’s because October was almost the exact opposite of September.
In September, tech stocks did very well and the rest of the market did poorly. Tech makes up a larger percentage of the index, so the tech made the markets look good when most stocks were down. That reversed in October. Tech was down sharply while the rest of the market was up. Overall, that left the major indexes down for the month.
This chart shows the performance of the tech stocks (the red line) versus the rest of the market (the blue line).
In September, tech stocks did very well and the rest of the market did poorly. Tech makes up a larger percentage of the index, so the tech made the markets look good when most stocks were down. That reversed in October. Tech was down sharply while the rest of the market was up. Overall, that left the major indexes down for the month.
This chart shows the performance of the tech stocks (the red line) versus the rest of the market (the blue line).
If every stock in the index had the SAME weighting, the market would have had a very nice month.
Market analysts had been worried about the “breadth” of the market, where many stocks were down and only a few names (tech) were keeping it afloat. But breadth improved dramatically this month.
All that said, the volatility level was noticeably higher this month.
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BONDS
Keeping with the theme that October was the exact opposite of September, bonds were a big concern in September. But that completely reversed this month and the bond worries dropped from the headlines.
Keeping with the theme that October was the exact opposite of September, bonds were a big concern in September. But that completely reversed this month and the bond worries dropped from the headlines.
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There were two main stories this month behind the market moves - tech and oil.
Starting with tech, there are growing concerns that the amount of money companies are spending on AI and its infrastructure will not bring in enough money to justify the costs. Companies are spending hundreds of billions on AI, but how will they make that money back?
Here’s a headline about an AI data center company spending a boatload of money building out AI, but no one knows if they can make this money back. Combined with higher borrowing costs, its seen as an example of the problems in the broader market. Stocks fell on the news.
Troubles with the AI buildout could spill over to many other sectors. Right now, construction of data centers is the only segment of construction that is expanding.
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OIL
Oil prices and the Iran war were the other story moving the markets.
One day, a headline might say something about how progress towards a deal is being made. Stocks rise, oil falls.
The next day the headline might say something about how the U.S. will totally annihilate Iran. Stocks fall, oil rises.
Now it looks like a massive attack “the likes of which the world has ever seen” will be coming after the election. That’s not helpful for oil prices, which closed the month near the highs of the initial Iran attacks.
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EARNINGS
Against this backdrop, it might be surprising that corporate earnings continue to be exceptional.
A little more than half stocks in the S&P 500 have reported their 3rd quarter results and according to Factset, earnings are up about 30% and revenue (what a company received in sales) rose about 12%. A lot of this can be attributed to higher sale prices of products and not an increase in the amount items sold.
Further, much of the growth in earnings comes from the tech industry which has very high profit margins.
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FED
Switching gears, the Fed held a policy meeting this month. They announced no changes to rates, which was largely expected.
A month ago, though, conditions were very different and investors thought there was a very high chance for a rate hike at this meeting. There’s a high chance of the Fed raising rates at their next meeting in December, but we find another rate hike this year highly unlikely.
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INFLATION
Inflation numbers released this month showed another rise in prices.
The monthly inflation number showed another strong rise.
Gas prices saw a considerable increase and was a big reason for the overall increase in prices last month.
These higher gas (and diesel) prices are raising transportation costs, which feeds into everything we buy.
Other basics like food continues to remain high, although they leveled off this month.
Other basics like food continues to remain high, although they leveled off this month.
When excluding food and energy (what economists call the “core” inflation), prices showed another rise.
Here’s a look at the inflation level for businesses, which keeps seeing higher prices.
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OTHER ECONOMIC DATA
Other economic data releases were mixed this month, but leaned more to the positive side.
The strength of the economy - as measured by the GDP report for the 3rd quarter - showed a decent increase.
Employment has been positive lately, but not at a level to get excited about. We’re seeing data that shows few workers are losing their job, but few are being hired, as well.
Both the manufacturing and service parts of our economy are expanding, though at levels slightly slower than the previous month.
Retail sales showed another increase.
Durable goods were up slightly.
The survey data showed consumer confidence improved from the previous month.
Small businesses were a little less optimistic.
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Where does the market go from here?
It’s tough to get a good feel for the markets here. The sharp sell-off at the end of the month made stocks more attractive, but there are a few important events in early November that will impact the markets.
First, the election on November 3rd will have an obvious impact on the markets.
Then any attacks on Iran will also impact the markets.
It’s very hard to tell where stocks will go, so we’ll just hang tight.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
