October is well known to be a volatile month for the markets, and last month’s performance drove home this point.
In fact, October was one of the worst months we’ve seen in years. The S&P 500 took quite a beating, seeing two individual six-day declines for the first time ever and ended the month down by 6.9%, the worst one month decline since September 2011.
Indeed, the U.S. stock market lost close to $2 trillion (actually $1.91 trillion, to be exact) last month. Among the worst hit stocks were the big tech stocks, the most well-known being FANG: Facebook, Amazon, Netflix and Google (actually Google parent Alphabet). Amazon saw 20.2% wiped off its share price, while Netflix wasn’t far behind with a loss of 19.3%.
Over the course of the month, six days out of 18 (33%) closed at least 1% up or down for the first time since 1963. In contrast, during the entire third quarter of the year there was not one change of that magnitude. More days closed in the red (78%, or 14/18) than in any other month since April 1970 (82%).
However, there is some good news. If we look at historical performance, there have been seven other years when the S&P 500 was positive YTD at the end of September but declined into negative YTD territory in October. In those years, November and December were higher on six occasions and up by 4.1% on average. With the market oversold, the stage is set for a rally in the coming weeks.
For more information, please read:
Five Takeaways from October’s Rough Stock Market Ride | Wealth Management