E October Has Been A Solid Month

As reported by Ryan Vlaststelica in MarketWatch.com, a “set it and forget it” strategy has paid off for investors. The third quarter was another winner across the economy, with basically all regions, sectors, commodities, and bond categories seeing gains over the period. For the U.S. stock market, the quarter was merely the latest notch on the bull market’s seemingly unstoppable march upward. The S&P 500 has risen for eight straight quarters—meaning the last negative quarter occurred in the third quarter of 2015—and it has risen by nearly a third over that period. Equities were supported by a number of factors over the quarter, notably a better-than-expected second-quarter earnings season, which supported the idea that fundamentals remained strong in corporate America despite high valuations. Continued improvement in the labor market added to the positive tone, helping to reduce volatility down to nearly nothing, while hopes for a business-friendly tax-reform package passing Congress also boosted sentiment.

As reported by Jeff Hirsch in the Stock Trader’s Almanac, during the most recent 21-year period, 1996 to 2016, October has been a solid performing month. It is NASDAQ’s #1 month with an average 2.4% gain. October is #2 for S&P 500 (+1.9%) and #3 for DJIA (+2.0%). In the seasonal pattern chart below, October typically begins well with all five indexes generally trading higher over the first four trading days of the month, then weaken modestly over the fifth, sixth and seventh trading days before moving higher through the end of the month with just a minor hint of weakness around trading days 17 and 18. 

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