Hope you are all doing well. Three modestly positive days to start the week gave way to selling pressure on Thursday and Friday, with big technology stocks again pulling the broader market lower. At Friday’s close, the NASDAQ was down 2.9% for the day and 2.0% for the week. The S&P 500 and the Dow both fell nearly 1% for the week. This is the drop that I have been predicting. The pattern recently has been that the market is up the first half of the week and down the back half. I expect that to flip next week, as I think the market could experience a bit more of a selloff on Monday and Tuesday leading into the election. Again, this is an opportunity to buy or to convert to a Roth IRA. As for the month of October, it was the second month in a row that the U.S. stock market saw widely varied performance across the major indexes. Negative October results for many technology stocks and growth equities weighed on the NASDAQ. The tech-heavy index fell 5.3% for the month. The S&P 500 was down 0.9%, while the Dow outperformed, rising 1.7% in October, owing in part to strong results from value stocks.
As for next week’s election, here’s something you should keep in mind. According to historical data, the S&P 500 has risen during the 12 months following midterm elections 18 straight times dating back to 1954. The year immediately following a midterm election historically generates the strongest average annual return of the entire four-year presidential cycle, averaging roughly 14% to over 17% depending on how far back you look. It’s Halloween weekend, so I have broken down this week’s update using the Halloween Anthems
Thriller – Michael Jackson
We are in the thrilling part of earnings season with the large tech firms reporting earnings. Earnings season is more than halfway over at this point. Full-season expectations rose modestly even as big technology companies reported mixed results. As of Friday, analysts projected that third-quarter earnings for companies in the S&P 500 rose 30.2%, up from a forecast of 29.5% the previous week. Such an outcome would mark the third consecutive quarter of earnings growth exceeding 25%. Stock prices usually move with earnings over the longer term; this is why dips like the one we are experiencing now should not be feared, even if it gets a bit scary in the coming days.
Somebody’s Watching Me – Rockwell
Markets are always watching the Fed. In a 10-2 board vote, the U.S. Federal Reserve kept its benchmark rate unchanged, opting to hold steady following a September vote in which the Fed lifted the rate for the first time since 2023. As for the next policy meeting, Friday’s trading in rate futures markets implied a roughly 73% probability that the Fed will approve another quarter-point rate hike on December 9, versus a 27% probability of keeping rates unchanged.
Ghostbusters – Ray Parker Jr.
The economy does seem to be afraid of inflation. Inflation ticked higher to 3.6% for September, which is well above the target of 2%, but the economy continues to grow. The U.S. government’s initial estimate of third-quarter GDP delivered a positive surprise, with growth estimated at an annual rate of 3.4% versus economists’ consensus estimate of 3.1%. The growth figure also marked an increase from the second quarter’s 2.2% GDP number. This is again another reason to stay invested even if the stock market continues to drop.
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