The stock market saw historic gains this month—in spite of some losses and some sectors of the economy continuing to suffer.
- The Dow Jones Industrial Average is up more than 12.2% since September 30. The gains stand in opposition to the expectation that the economy is going to slump over the next 12 to 18 months—with some analysts expecting a slow downturn going forward.
- “Stocks slipped Monday as the final trading day of October kicked off but the major averages were on pace to snap a two-month losing streak,” says CNBC.
- It became the 10th biggest monthly gain in the past century with a month-to-date gain of 13.96% as the market closed on Monday. It has become one of the strongest October months in the 126-year history of the stock market.
- This has been the biggest October gain since the Dow index was founded in 1896, according to Carson Group analyst Ryan Detrick. “The only other 10% October gains for the Dow came in 1982 and 2002, both breaking bear markets,” says Forbes.
- “That would be the second-best month on a percentage basis over the last 30 years, trailing only April 2020, coming on the heels of the index’s worst September in 20 years,” Forbes continues.
Why it’s Important
As we previously reported, midterm elections tend to coincide with market improvements. October tends to mark the beginning of uptake in the market, as seasonal spending begins to increase. There was speculation from analysts that October would be a strong month for the stock market after September’s losses, which destroyed over $13 trillion in wealth.
“October’s gains have come despite a mixed third-quarter earnings season, which has shown slowing growth and a few major disappointments from large tech companies such as Meta Platforms and Amazon. The season continues with Uber, Pfizer, and Advanced Micro Devices among the biggest names to report,” says CNBC.
Backing up a bit
Tech stocks, namely Alphabet and Amazon, have performed poorly but the high performance of industrial and energy stocks has given the Dow a major boost.
“Some of that is down to Big Tech’s dismal earnings season. But it also shows that value stocks are flourishing in an inflationary environment. The Dow’s big names are well-placed to pass on price rises to consumers and less impacted by costs than their tech counterparts,” says Barron’s.
The gain may be temporary though as the Dow overall continues its overall 2022 slump. The economy is expected to slowly descend into recession and inflationary increases.
“The historic gain may be little more than a mirage as the Dow remains on pace for its worst year since 2008 and other major stock indexes continue to slump,” says Forbes.
“A new month begins Tuesday, the first 10 days of which are likely to set the tone for markets for the rest of the year and maybe beyond,” says Barron’s.