October Shows Signs of Economic Strength
October provided equity investors with the best month in nearly 20 years. In percentage terms, the Dow Jones Industrial Average (DJIA) gained 9.54%, NASDAQ rose 11.14% and the S&P 500 closed up 10.77% from September1. While November typically is the “sweet spot” for technical minded investors (the S&P 500 has advanced in 57% of Novembers since 1928 and is continuously the second-best month of the year since 1950), the unresolved situation in Europe continues to hang over the market.
While consumers remain pessimistic, they are still spending enough money to move the economy along. Confidence improved from 59.4 in September to 60.9 in October, but still remains low as reported by University of Michigan Consumer Sentiment Survey2. Shopping malls and the factories showed signs of strength as evidenced by the retail sales and the manufacturing index data. U.S. auto sales also posted a 7.5% monthly gain in October3.
The most reassuring economic indicator was the U.S. 3rd Quarter Gross Domestic Product (GDP). GDP refers to the value of all goods and services provided, and is the primary measurement used to track the health of a country’s economy. A 2.5% rise in the U.S. 3Q GDP is what the majority of economist had projected and puts to rest the arguments that we were on the verge of a double-dip recession4.
Globally things were looking much better as the Euro Zone nations worked toward a solution to avert a Greek default. The month ended with the Greek Prime Minister George Paparandou throwing a political curveball to the European Union, declaring his intent only to make the necessary deficit-cuts contingent on a public vote.
Overall, October was a very positive month for investors. Looking forward in the short term, we remain cautiously optimistic as the Euro Zone nations work to re-establish stability.
1. Online.wsj.com, bigcharts.com [10/31/11]
2. www.npr.org.blogs/thetwo-way/2011/10/25/191683694/consumer-connfidence-back-down-to-recession-level [10/25/11]
3. www.ism.ws/ISMReport/MfgRob.cfm [11/1/11]
4. abcbnews.go.com/Business/gdp-grew-25-percent-boosted-consumer-spending-double/story?id=14821833[10/27/11]