UPDATE: The stock market faces significant uncertainty as the S&P 500 plummeted 2.7% on October 10, 2023, marking its steepest decline since April. The drop follows President Trump’s announcement of a new 100% tariff on Chinese imports, reigniting fears of a trade war.
Investors are on high alert as October is historically fraught with volatility. Notorious sell-offs have occurred during this month, including a shocking 20.5% decrease in a single day on October 19, 1987, and a decline of over 16% in October 2008 amidst the Great Recession. The question on every investor’s mind: will the S&P 500, Nasdaq, and Dow Jones continue their upward trajectory or fall into the depths of October’s historical declines?
The current market situation raises concerns. Despite a strong rally that has seen stocks gain over 35% since the tariff-driven sell-off in April, recent events have sent shockwaves through investor sentiment. October has produced mixed results over the past five years, with the S&P 500 finishing the month lower in 2023 and 2024 and higher in 2022 and 2021.
What does history tell us? According to the Stock Trader’s Almanac, the S&P 500 has finished October higher 59% of the time since 1950, yielding an average return of 0.9%. This makes October the 7th best month for the index historically, despite its reputation for dramatic reversals.
As investors brace for what could be a turbulent month, the economic landscape presents additional challenges. The unemployment rate rose to 4.3% in August, the highest level since 2021. Reports suggest that job growth may have worsened in September, further complicating the economic outlook. The Federal Reserve is expected to announce another interest rate cut of 0.25% on October 29, 2023, with a 98% probability of this outcome. This move aims to stimulate borrowing and bolster corporate profits, but concerns remain about a slowing economy.
The looming trade war and a potential economic slowdown create a precarious situation for investors. If the tariffs lead to prolonged instability, market confidence could wane, resulting in further declines.
As we move deeper into October, many analysts are advocating for a “buy-the-dip” strategy. The historical performance of the market suggests that while October can be rocky, it often sets the stage for gains in subsequent months, particularly November and December, which have historically shown stronger returns.
What will happen next? Investors will be closely monitoring economic indicators and the Federal Reserve’s response to the evolving landscape. The stakes are high, and the coming weeks will be critical in determining the direction of the stock market as uncertainty reigns.
Stay tuned for the latest updates as this story develops, and share this news to keep others informed on the market’s volatile journey through October.