October produced the best monthly gains for stocks...ever. US stocks added $1.8 trillion of market capitalization gains - more than any prior month on record. On a percentage basis, global stocks (MSCI All World Index) gained 7.8%, marking the best percentage gain since October 2011.
Markets were lifted by several factors, including:
- Solid quarterly corporate earnings;
- Delayed interest rate hikes by the Fed;
- Monetary stimulus by the People's Bank of China;
- Signs of economic stabilization in China;
- The prospect of further European Central Bank monetary stimulus; and
- A Congressional deal to raise the debt ceiling.
October's strong gain followed the worst 2-month stretch for global stocks since October 2011. Notably, the worst 2-month periods for stocks since the financial crisis (Aug-Sep 2011, May-Jun 2010, and Aug-Sep 2015) have all been immediately followed by sharp monthly gains for stocks (3 of the 4 best one month gains over the same time period).
This unusual repetition of scary environments and significant declines followed by sharp positive reversals has tended to be the result of central bank intervention. At some point, we will likely return to a period where central banks are less active and markets function on their own merits but that does not seem to be on the imminent horizon.
We encourage you to call or email us if you have any questions about the markets or your portfolio. As always, you can reference the RPG Monthly Market Snapshot by clicking here for some key economic data points and index returns.