October Stock Market Outlook – Forbes Advisor

After seven months of gains, the U.S. stock market finally satisfied its skeptics by declining in September. The S&P 500 tumbled 4.8%, notching its worst month since March 2020. The Dow Jones Industrial Average (DJIA) and Nasdaq Composite posted their weakest monthly showings in 2021 date.

In short, the market that seemed impervious to bad news finally showed it’s not.

The catalysts for the sell-off range from the China Evergrande crisis, surging Covid-19 delta variant cases, higher inflation, supply chain worries and the Federal Reserve’s plans to buy fewer bonds in the months ahead. While the bears may feel vindicated, the market’s bulls point to an S&P 500 that’s still up nearly 16% on the year.

There are plenty of reasons for both camps to believe they’re right about the market, especially with earnings season kicking off mid-month. Greg Bassuk, chief executive officer of AXS Investments, typically tracks two to three big factors that could dictate the market’s ups and downs in any given month, but he’s watching five factors in October—a telling sign of how investors are trying to make sense of everything going on right now.

“The million-dollar question is what does this mean for investors and what do investors do about it,” says Bassuk. “We definitely see the likelihood of higher volatility.”

Volatility could also prove to be pivotal in determining the market’s direction—and whether the selloff that began in September could worsen to become a full-blown market correction.

From Economic Indicators to Covid and More

With so much to monitor in the market, that’s likely to make for an interesting month ahead. Here are the five factors Bassuk will be watching in October:

1. Earnings season. Companies will begin reporting earnings for the third quarter in mid-October, and market participants will have an opportunity to look under the hood for specific companies, learn about the outlook into 2022 and get a broader sense of what’s happening in the economy. “This particular earnings season is going to be pretty important to give us visibility into what Corporate America is thinking about the whole recovery,” Bassuk says.
2. Economic indicators. While economic data reports are always important, investors will be looking at how the rise in delta variant Covid-19 cases has affected consumer spending, consumer confidence and economic growth more broadly. These reports also shed light on supply chain issues and rising inflation, he notes.
3. Federal Reserve comments. Central bankers aren’t scheduled to meet in October but investors will monitor communications from officials that could offer more insight as to when the Fed will begin tapering bond purchases.