Broker Check

Spooky Start to the 4th Quarter

| October 03, 2019

The month of October has opened on a volatile note, after a historically calm September in the equity markets. The headlines of: Impeachment, Manufacturing Weakness, Global Slowdown and Softer Employment Report have led to a selloff that may encourage another rate cut by the Federal Reserve.

We have been ahead of this trend, adding fixed income and taking more of a neutral posture in portfolios. Our team is always looking at opportunities to take advantage of volatility, but we want to be patient as we enter the 4th Quarter. It is not a coincidence that the stock market is trending at the same levels as 20 months ago when tariffs were announced. Trade is going to be paramount to the next move in the capital markets.

 October related market data to consider: 

  • Since 1950, no month has had more 1% moves (higher or lower) than October.
  • Since 1928, 6 of the 10 worst single-day drops have taken place in October; however, 3 of the 10 best days ever occurred in October as well.
  • This is a pre-election year, October’s average returns in a pre-election year have been muted since 1950. The catch here is that this average return is greatly impacted by the 21.8% drop in 1987. The median return is actually quite respectable.
  • October has been higher during a pre-election year every year since 1999, with an average return of an impressive 6.5%.

The lack of turbulence in September could mean that the usually volatile month of October could be a bit of a wild ride. We will have a new post on ‘The Anatomy of a Recession’ next week. Until then, please click on the chart below regarding the impact on corporate earnings since tariffs have been in place.

Earnings Lull Reflect Tariff Impacts Chart



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