October Monthly Market Commentary

At first glance, last week’s headlines may lead you to think that the markets are fluctuating more than they actually are. Major indexes stuck to similar range-bound performance we have seen for the past three months. For October, only emerging market equities were positive out of the broad indices shown below.

Recent Key Events 

FBI Announces Renewed Look at Hillary Clinton’s Emails 

On Friday, October 28, FBI Director James Comey sent a letter to Congress alerting them that the agency would be reviewing new Hillary Clinton emails discovered during their investigation of former Congressman Anthony Weiner.[1] When news of Comey’s letter broke, the major indexes responded quickly—and negatively. For example, the Dow, which had been up 75 points, reacted with a nearly 150-point swing before closing about 10 points lower.[2]

The announcement threw a wrench in an already contentious and exhausting presidential race. Recently, polls showed that Clinton held a solid lead over Trump, and the markets had priced in her win.[3] However, Friday’s news calls this assumption into question, creating greater uncertainty for the next two weeks. 

If there is one thing the markets hate, it is uncertainty. Moreover, while big headlines rarely affect long-term performance, the markets may react to them in the short run. Yet, you should not change your investments, speculating about short-term market moves.

Gross Domestic Product (GDP) Has Biggest Gain in Two Years

Last Friday, the government announced that GDP — essentially, the economy’s scorecard—had 2.9% growth, beating the expectations of 2.5%. Not only is this rate the best we’ve seen in two years, but it also shows far faster economic expansion than the first two quarters of 2016, when U.S. growth averaged just over 1%.[4]

With the economy is growing faster prior expectations, a December interest-rate increase seems more likely. On Friday, traders showed an 83% likelihood that the Federal Reserve would raise rates at their last meeting of the year.[5]

Keep in mind that if the Fed raises rates, they would not be doing so to temper the economy’s growth. Instead, they would be using this positive GDP report as further evidence that the economy is strong enough to handle a move toward more normal interest rates.

Eye on the Month Ahead

November should be an interesting month for the economy in general and the stock market in particular. Of course, the big news focuses on the results of the November 8 presidential election. Once the dust settles from the election, and presuming interest rates are not increased in November, equities markets may begin to focus on what is left of earnings season as well as the jobs and inflation data.

To Your Prosperity,

Kevin Kroskey, CFP®, MBA

Future Posts at www.TrueWealthDesign.com

Any future blog posts will be done at www.TrueWealthDesign.com . Thank you, Kevin Kroskey, CFP, MBA