Volatility is normal in October. October should be known for volatility, not crashes, as no month has seen more 1% changes (up or down) for the S&P 500 Index going back to 1950. October is also about average in terms of its month-end returns (according to data back to 1950). Given the positive fundamentals, we expect the markets to weather this recent volatility and we see potential for a year-end rally.
What happens if you miss the 10 best and 10 worst days of the year? If you could have avoided the 10 worst days of each year for the S&P 500 Index since 1990, you would have average annual gains of close to 40%. Even if you missed the 10 best days of each year, you still would have been in the green six times (1991, 1995, 1996, 1997, 2013, 2017).
Corrections are normal, even in positive years. S&P 500 has produced a positive total return (with dividends) in 33 of the past 39 years going back to 1980, including 2018 year to date.* During that period, the average annual maximum peak-to-trough decline in the index was 14%. Even during positive years, the average maximum drawdown in the index was 11%. *click link for asterisk
The U.S. economy likely grew at a moderate to strong pace in the third quarter. Consumer spending continues to be the primary driver of output, while business spending’s contribution may drop off. Net exports and inventories may have meaningfully influenced GDP as effects of the U.S.-China trade dispute bled into manufacturing and demand.