Boo! Did the markets scare you this past month? October has developed the reputation as a bad month for the stock market, most likely due to the notorious crashes in 1929 and 1987, as well as a -27% sell-off in the S&P 500 during the 2008 Financial Crisis. However, in reality, October is typically a transition month leading to the two strongest months of the year historically, November and December.
As mentioned in our past couple market commentaries, we expected to see some type of correction simply due to the duration that had passed since the last 5-10% drop. Not surprisingly, we experienced a correction of -7.4% when the S&P 500 hit record highs closing at 2,011.36 on September 18th, and then bottomed out closing at 1,862.49 on October 15th. However, since that bottom, the S&P 500 set a new record high, closing at 2,018.05 on October 31st. This is a perfect example of why we don’t try to time market corrections. Within a period of 32 trading days, we went from records highs to a correction and back to records highs.
As always, our goal continues to be managing risk by looking for red flags that a recession is on the way. Here’s what the latest data says:
- The Conference Board’s Consumer Confidence Index rose to a seven-year high in October, which was more than economists expected. Until consumer confidence peaks and starts a downward trend, the odds of a recession remain low.
- Gas prices hit a 4-year low (contributing to strong consumer confidence), and long-term interest rates remain low (lowering business costs) even though the Federal Reserve has completed the taper of quantitative easing. While it’s unlikely these two macroeconomic indicators stay as low as they are for an extended period, they are definitely helping the bull market carry on.
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John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit https://www.chladekwealth.com.
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