Thanks to a rally in the last two days of October, equities (S&P 500 Index) avoided their worst month in a decade when equities fell over -16%. The almost +3% move over Tuesday (Oct 30) and Wednesday (Oct 31) buoyed stocks for a temporary relief but they still finished the month down almost -7%, the index’s worst month in 7 years.

 

Before October, the S&P 500 finished positive in 27 of the last 31 months dating back to March 2016, resulting in a +56% return. It seemed a healthy pullback or correction (decline of 10% or more from peak to trough) was in order. NorthCoast President & CEO, Dan Kraninger, wrote about it in his recent quarterly message to clients at the beginning of the month.

 

Rising interest rates, a stronger dollar, and continued escalation of trade conflicts with China could have all attributed to falling stock prices as investors reevaluated their outlook on future growth. Along with the stock market’s decline was an unusual concurrent drop in bond prices, putting most diversified portfolios in a difficult position. Yet bullish investors (including NorthCoast) did their best to take advantage of the dips. Big one-day advances followed sharp declines provided optimism in an over-corrected market. The S&P 500 Index finished up or down by more than 1% in 10 of the last 15 sessions (5 positive and 5 negative).

 

Slower revenue growth and continued privacy issues derailed some of the largest technology companies, as the sector was one of the hardest hit in the October decline. Across the globe, international equities continued to decline with the MSCI All-Country World Index ex-U.S. (ACWI ex-U.S.) falling -8.1% for the month amid slowing economic growth.