October Looks to be the First Negative Return Month Since February

S&P 500 Index 2009

As of yesterday’s close, the S&P 500 Index’s total return for October is -1.26%. If that number holds through tomorrow, it will break the seven-month streak of positive returns for the index.

Why was October a down month?

I can think of a few reasons:

1. Profit-taking. It seems to happen after we have a massive runup in stocks, like we saw from March through September when the index was up nearly 46%.

2. Investors might be wondering how much further up the market can go considering the current economic conditions. Unemployment is still up and is still trending up. It’s hard to have a recovery with legs if unemployment is high.

3. Consumer spending is down, which puts pressure on GDP since 71% of our GDP comes from consumer spending. People are still paying off debt. Those dollars going towards debt aren’t going towards spending.

I don’t know about you but I have been scratching my head, wondering why the market was marching back up as quickly as it did.

One thought on “October Looks to be the First Negative Return Month Since February”

  1. October has seen the US dollar trying to stabilize from it’s free-fall since early March. In that time, the USD Index is down about 15% (meaning every dollar you owned on March 1, is now only worth 85 cents today). This is why you’ve seen gas prices shooting up: gas is not more expensive, your dollars are just not worth as much.

    Now, looking back at May, the USD lost about 6.4% in that month. The return of the S&P 500 was actually -1% (or so) for May in “constant currency”.

    In summary, your investments need to rise faster than your currency falls, otherwise, your are losing “real” wealth.

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