Stocks Historically Climb in October Despite Volatility, But Headwinds Loom
NEW YORK – October 11, 2024 – despite its reputation for market shocks, October has historically been a positive month for stock returns, with the S&P 500 finishing higher 59% of the time since 1950, according to the Stock Trader’s Almanac. The index has averaged a 0.9% gain during the month, ranking it as the 7th best month for S&P 500 returns.
This historical trend suggests that October pullbacks can present buying opportunities, as they often precede strong performance in November, December, adn January. Jeffrey Hirsch of the Stock Trader’s Almanac states, “October is a great time to buy.”
However, analysts caution that several factors could challenge this pattern this year.The S&P 500’s current price-to-earnings (p/e) ratio of 22.8 is historically high and has frequently enough been followed by weaker returns.
Geopolitical risks,specifically a potential re-escalation of the trade war with China – with President Trump possibly leveraging 100% tariffs – also pose a threat to corporate earnings.
Recent economic data adds to the uncertainty. The unemployment rate rose to 4.3% in August, the highest level since 2021, and preliminary data from Bank of America and ADP suggest a further weakening of the jobs market in September.
The Federal Reserve cut interest rates by one quarter percentage point in September in response to these economic concerns, and is widely expected to implement another 0.25% cut on October 29, with the CME’s fedwatch tool currently assigning a 98% probability to the move. While rate cuts can stimulate borrowing and boost corporate profits, their effectiveness in offsetting a slowing economy remains uncertain.
