Equities took it on the chin, with the Dow down 800, and the momentum and growth stocks really took it even harder.
Stocks plummeted Wednesday in what was the worst one-day drop since February. In this special update podcast, LPL Research strategists share their perspectives on the drivers behind the plunge and put the big market sell-off into context.
Higher bond yields, U.S./China tensions, the upcoming midterm elections, six straight months of gains, and worries about peak margins this earnings season all contributed to the big drop. The strategists note that October has historically had above-average volatility and average returns. No month has seen more 1% changes (up or down) than the month of October for the S&P 500 going back to 1950.
However, the S&P 500 Index had one of its least volatile third quarters in history. This was the first year since 1963 that the index’s third quarter didn’t have a single 1% change up or down. The S&P 500 went 74 days straight without a 1% move—the 10th longest streak in history. Some type of volatility was waiting to happen.
The good news, according to the strategists, is that economy is still in excellent shape with consumer spending growing, consumer and business confidence high, and the job market strong. Manufacturing surveys are near record levels, interest rates are still fairly low, and corporate profits remain strong.
Listen to the entire podcast to learn more about where the LPL Research strategists see the economy going after the historic stock drop.
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