The Market Week in Review

October has a reputation as the worst month for stocks because some of the stock market crashes occurred during that month.  The stock market crash that lead to the Great Depression of 1929 occurred in October of that year.  Black Monday, the great crash of 1987 occurred on October 19th and saw the Dow plummet 22.6% in a single day.

 

This year, October is certainly living up to its bad reputation.  Since October 1st:

 

  • The Dow is down 1,770 points, or -6.69%.

 

  • The S&P is down 255 points, or -8.76%.

 

  • The Nasdaq has fallen 879 points, or -10.93%.

 

  • The CBOE Volatility Index (“VIX”), commonly referred to as the stock market’s “fear gauge” has more than doubled to 24.16.

 

The recent market gyrations have been a cause for concern for all but the most passive of investors.  While we are certainly not immune from the fears that can be triggered by these types of short-term market moves, at times like this we find the courage needed to stay the course by looking to the past for perspective.

 

  • Over the past 12 months the Dow is still up 5.50%, the S&P is up 3.84%, and the Nasdaq is up 9.31%.

 

  • The volatility we have experienced in October has not justified a bear market signal as many market and economic indicators are still strong.

 

  • As evidenced by The Milwaukee Company’s Economic Briefing Report (which can be found HERE), a number of leading economic indicators suggest the U.S. economy remains in very good shape.

 

  • Historically, the stock market has done a poor job of predicting recessions. Only 1 of 3 double digit declines in stock prices have been followed by a recession.

 

  • There S&P 500 has experienced corrections of -16.0%, -19.4%, -12.4%, -13.3%, and -10.2% since mid-2009, when the stock market’s recovery following the Great Recession began. And yet, as of Friday’s close the S&P has risen by approximately 194% during that same time frame.

 

Index Started Week Ended Week Change Change % YTD %
DJIA 25,444.34 24,688.31 -756.03 -2.97% -0.13%
Nasdaq 7,449.03 7,167.21 -281.82 -3.78% 3.82%
S&P 500 2,767.78 2,658.69 -109.09 -3.94% -0.56%
Russell 2000 1,542.04 1,483.82 -58.22 -3.78% -3.37%

 

THIS WEEK’S ECONOMIC HIGHLIGHTS

 

  • New home sales fell 5.5% in September to an annualized rate of 553,000, much lower than the 625,000 expected.  Supply of new homes had been holding sales down, however supply was up 2.3% to 327,000 in September.  Prices of new homes were virtually flat with the median rising only 0.3% to $320,000.

 

  • Durable goods orders rose a modest 0.8% in September after jumping 4.6% in August.  However, excluding the volatile transportation equipment component, orders only rose 0.1%.  Year-over-year durable goods orders have risen a strong 5.9% when excluding transportation.

 

  • The trade deficit in goods increased to from $75.5 billion to $76 billion in September, despite a large increase in exports.  That said, exports jumped 1.8% to $140.95 billion but was offset by a 1.5% increase in imports to $217 billion.

 

  • Initial unemployment claims increased by a marginal 5,000 to 215,000 for the week ending October 20th as Hurricane Michael showed to have little impact.  Continuing unemployment claims fell by 5,000 to a 45-year low of 1.64 million.

 

  • Third Quarter GDP came in at an annualized growth rate of 3.5%, slightly above expectations of a 3.3% growth rate.  Highlighting the GDP report was a strong 4.0% increase in consumer spending, while business investment came in at an underwhelming 0.8%.

 

RECOMMENDED READING

 

This week there are two recommended readings that shed light on what to expect during market corrections and how to calculate an understanding of its impact to your portfolio.

 

https://awealthofcommonsense.com/2018/10/when-stocks-fell-10/

 

https://humbledollar.com/2018/10/warning-shot/

 

Important Disclosures:  Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly from The Market Commentator℠, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio.  Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in The Market Commentator℠ serves as the receipt of, or as a substitute for, personalized investment advice from The Milwaukee Company™.

 

In addition, The Market Commentator℠ may contain links to articles or other information that are contained on a third party website.  The Milwaukee Company does not endorse or accept responsibility for the content, or the use, of the website.  The Milwaukee Company assumes no liability for any inaccuracies, errors or omissions in or from any data or other information provided on the pages.  Thank you.
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