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October Looks to be the First Negative Return Month Since February

By JLP | October 29, 2009

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.

Topics: Investing, S&P 500 Index | 1 Comment »


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

  1. BG Says:
    October 29th, 2009 at 7:13 pm

    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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