KEY HIGHLIGHTS
- The S&P 500® was up 6.91% in October, bringing its YTD return to 22.61%.
- The Dow Jones Industrial Average® gained 5.84% for the month and was up 17.03% YTD.
- The S&P MidCap 400® increased 5.82% for the month, bringing its YTD return to 21.13%.
- The S&P SmallCap 600® gained 3.36% in October and had a YTD return of 23.02%.
MARKET SNAPSHOT
The S&P 500 has been “up and down and over and out, and I know one thing: each time I find myself layin’ flat on my face, I pick myself up and get back in the [market].” That’s investing, and I’m glad I do it. October is known for its volatility and market crashes (Oct 19, 1987: -20.47%; Oct 28, 1929: -12.34%; Oct 29, 1929: -10.16%), so after September’s 4.76% decline (the index’s first monthly decline since January 2021’s 1.11% decline, and the worst since March’s 2020’s -12.51%) not much was expected, and concern was high. While volatility opened the month (the first three days each moved at least 1%), the index then calmed down to post mostly small gains, as September’s loss was made back, and it continued upward, posting five new closing highs (59 YTD, tied for third since 1928), closing the month at one of them and above 4,600 for the first time (4,605.38). What helped the S&P 500 turn around, besides a steady stream of individuals buying and some professional bargain hunting, were (again) higher earnings than expected (80.8% beat rate), as sales were set to post a new record (76.6% beat rate), with operating margins coming in at 13.33%, compared to the average of 8.12% (from Q1 1993)—“follow the money.” Other “boosters” were positive economic reports (even when they missed expectations), slowing COVID cases (as there appears to be a new variant, Delta Plus), more vaccinations (slow, but there is growth, as the term “herd immunity” died), and continued low (but not steady) interest rates (the 10-year’s trading range was 1.46%-1.69%). In the end (and it ain’t over), market optimism won, with the index closing up 6.91% for the month, up 22.61% YTD, and ending October on a new closing high. At some point the market has to correct, but if you’re not in it for the gains you’re most likely not following the money (and out of a job).
On Capitol Hill, Congress raced to find a compromise on the USD 3.5 trillion education, environmental, and health bill, which would permit a vote on the USD 1 trillion infrastructure bill. Biden outlined an adjusted social spending program (education, environmental, and health bill) for USD 1.85 trillion, half the original USD 3.5 trillion bill, as he traveled to Europe for the G20 meeting (his second major trip outside the U.S.). He will also attend a U.N. climate conference (in Glasgow, Scotland) without the U.S. climate bill, which is still being negotiated in Congress (with his new outline). Congress approved a temporary extension bill for the national debt through Dec. 3, 2021—the same expiration date as the temporary budget bill, practically guaranteeing a replay of last-minute negotiations and volatility. The U.S. and Chinese presidents will meet, as Biden and Xi Jinping agreed to hold a virtual summit this year, as trade and competition are expected to be at the top of the list, with political issues second. After Biden pushed for it, the Port of Los Angeles, one of the busiest ports in the country, started to operate 24 hours a day and 7 days a week to ease cargo bottlenecks and U.S. supply issues. The U.S. fiscal 2021 (September) deficit came in at USD 2.9 trillion, second only to 2020’s USD 3.1 trillion deficit (the last surplus was in 2001, at USD 127 billion).
Health care issue Merck (MRK) said it would seek emergency authorization for its oral COVID-19 treatment. Health care issue Pfizer’s (PFE) vaccine was approved by the FDA for first doses for children 5-11 years of age, with Moderna releasing data showing positive responses for its vaccine in children. The U.S. approved (via the FDA and the CDC) booster shots for the three major vaccines (Pfizer, Johnson & Johnson, and Moderna), as it also approved the mixing of the booster shot. China started to vaccinate children as young as three, as the country’s virus count continued to increase. Melbourne exited its lockdown amid vaccination progress. Russia ordered most workers to take a week off (Oct. 30 through Nov. 7, 2021), as it tried to break the COVID-19 spread. The number of new cases of COVID-19 in the U.K. surged, as some saw a new strain of Delta variant, referred to as Delta Plus. Several U.S. companies (such as General Electric [GE] and Union Pacific [UNP]) continued to announced vaccine mandates for employees to comply with a U.S. Dec. 8, 2021, mandate set for federal contractors. Southwest Airlines (LUV), however, dropped a proposal to put unvaccinated staff on unpaid leave after a pilot shortage, which forced it to cancel over 2,000 flights.
