Monthly Market Monitor - October 2014 Recap

Market Indices1AugustYear-to-Date
S&P 5002.44%10.99%
Russell 30002.75%9.90%
MSCI EAFE-1.45%-2.81%
MSCI Emerging Markets1.18%3.63%
Barclays US Aggregate Bond0.98%5.12%
Barclays Municipal0.69%8.32%
Barclays US Corporate High Yield1.19%4.72%

  • Following a September loss, the S&P 500 rebounded over 8% from a mid-October low.
  • The U.S. economy has had the best two-quarter GDP growth since the second half of 2003.
  • WTI crude oil prices fell 12% in October, the largest monthly decline in over two years.

Stocks ended October with a Halloween Day rally that resulted in over half of the S&P 500's gain for the month after Japan's central bank voted to significantly increase its asset-purchase stimulus program by 20 trillion yen to ¥80 trillion (US$724B). The announcement prompted a worldwide shift from safer-haven assets into equities. Friday's rally closed out an intensely volatile month not seen since 2011. Spurred lower by European slowdown concerns, the S&P 500 had skidded 5.5% to a mid-month low, yet thereafter regained momentum as strong corporate earnings helped restore investor confidence. Other notable events in the month were the emergence of the Ebola virus in the U.S. and continued Islamic terrorism activity, primary in Iraq and Syria, but also appeared for the first time in Canada. Third quarter economic growth rose more-than-expected (3.5% GDP versus 3% forecast; 4.6% 2Q growth) and the Federal Reserve concluded its monthly bond-buying program. The Dow Jones Industrial Average and S&P 500 both ended the month at new all-time highs.

Small-cap stocks, as measured by the Russell 2000 Index, surged by 6.6% last month, widely outperforming large-caps. Yet for the year, after erasing earlier losses, the Russell 2000 is up just 1.9% YTD. Mid-cap stocks, as measured by the Russell Mid Cap Index, rose 3.1% in October, extending YTD gains to 10.2%. Growth-oriented stocks outperformed value for both October and YTD. The Russell 1000 Growth Index rose 2.6% in October and 10.7% YTD, whereas the Russell 1000 Value Index gained 2.3% and 10.5% respectively.

Eight of the ten major equity sectors rallied last month, led by Utilities (+8.1%), Healthcare (+5.4%), and Industrials (+3.7%). Energy (-2.9%) and Materials (-2.5%) declined in October. For the year, all ten sectors are higher, with Utilities (+23.1%), Healthcare (+22.9%) and Technology (+16.1%) advancing the most, while Energy (+0.3%) is up the least due to the plunge in crude oil prices. NYMEX gold and silver futures sank to their lowest levels since 2010, falling 2.9% and 4.8% respectively in October.

Overseas developed markets once again underperformed the U.S. as the MSCI EAFE Index fell 1.5% last month and is down 2.8% YTD. Following a 7.4% September loss, the MSCI Emerging Markets Index rose 1.2% in October, extending YTD returns to 3.6%. China's Shanghai Composite returned 2.4% last month, reaching a 20-month high.

Treasuries, as measured by the Barclays U.S. Government Bond Index, rallied 0.9% in October, lifting YTD gains to 4%. Despite a volatile 30 basis point yield swing during October, the yield on the 10-year U.S. Treasuries ended the month at 2.336%, down only five basis points. U.S. investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, returned 1% in October, extending YTD gains to 5.1%. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, rose 1.2%, boosting its YTD return to 4.7%. The Barclays Municipal Bond Index gained just 0.7% last month, but is up for a tenth straight month.

  1. Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest)

This information is compiled by Cetera Investment Management.

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