3 Bright Spots from October’s Stock Market Performance
3 Bright Spots from October’s Stock Market Performance
By: Stacey Nickens
As we head towards Thanksgiving, I’m reminded of the power of gratitude. Psychology research has shown that gratitude helps people feel happier, feel more content with their day-to-day lives, become healthier, better manage challenges, and develop stronger relationships. With all that said, I encourage you to take a moment to practice some financial gratitude. In terms of your financial situation and behavior, for what are you grateful? Perhaps you feel grateful for the way you’ve saved this year, or perhaps you feel grateful for the way you’ve invested. Whatever is on your list, these three stock market bright spots might help you feel a little more gratitude for and positivity about your investment portfolio.
1. The S&P 500 logged its strongest monthly return of 2021. Growing nearly 7%, the S&P 500 largely shook off its September slide. Growth equities were a big part of the the S&P 500’s upward climb. Mega cap stocks such as Microsoft and Apple pushed technology forward. However, the consumer discretionary and energy sectors were the big winners of the month. Retail, apparel, and homebuilders helped the consumer discretionary sector’s performance, as did Tesla’s impressive 43.7% monthly gain. The energy sector outperformed as oil prices rose. The financial and materials sectors also saw relative strength.
The takeaway: While stock market volatility occurs, the stock market historically trends towards long-term growth. Dips are often followed by healthy upswings, and investing continues to be a strong tool for growing your savings, outpacing inflation, and saving for retirement.
2. The first-half of earnings season showed strong corporate results. Companies continued to warn about supply chain, input cost, and labor market issues. However, many companies discussed their efforts to mitigate these problems. Overall, there seems to be some sense that these issues are reaching their peak. At the same time, companies underscored a strong demand environment. With 56% of S&P 500 companies having reported, 82% beat earnings estimates and 75% beat revenue estimates.
The takeaway: While U.S. corporations are facing challenges, healthy companies are finding ways to manage those challenges and grow their earnings. Investing in these healthy companies could accordingly allow you to benefit from their ingenuity and strength.
3. Economic releases could point to a cooling off of inflationary pressures and to renewed health in the labor market. While September’s CPI increased faster than in August, September’s core PPI posted the slowest growth since May. PPI measures inflationary pressures from the producer’s side and is accordingly seen as a good measure of the direction of future consumer inflationary pressures. Accordingly, the slowdown in PPI could indicate that the rate of increase in costs of goods and services will level off moving forward. Additionally, nonfarm payrolls did not grow as much as expected, increasing by only 194,000. At the same time, initial jobless claims fell throughout September and moved below 300,000. Initial jobless claims hit a post-pandemic low, suggesting that the labor market could be improving.
The takeaway: The Fed has reiterated that inflation seems to be a temporary issue, and the slowdown in PPI could be evidence to their point. Consumers could feel comfort knowing that the costs of goods and services may not continue to increase at such a rapid rate. Similarly, investors may take comfort from knowing that a decline in jobless claims is pointing to a healthier labor market.
