The stock market was more of a treat than a trick in October

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The Dow closed around 90 points higher, or 0.3%, setting a new record. The index jumped nearly 6% in October, its best monthly gain since March.
The S&P 500 was up 0.2% while the Nasdaq increased by 0.3%. Both hit all-time highs and gained around 7% for the month – the most for each index since November 2020.
October also ended with a new king of the S&P 500. Microsoft (MSFT), which reported windfall revenue earlier this week, is now worth around $ 2.49 trillion, compared to a market cap of $ 2.48 trillion for Apple. Actions of Apple (AAPL) fell 2% on Friday after profits.

October’s rally for the entire market could bode well for investors. After all, stocks often recover in November and December, with traders betting on strong fourth-quarter earnings over the holidays and a boost to the overall economy through healthy consumer spending.

“There are a few things that should support the bullish momentum in the market,” said Larry Adam, chief investment officer at Raymond James. “The incomes are healthy and so is the outlook. Consumer demand is strong as businesses grapple with supply chain constraints.”

The pullback in September may have been the pause for refreshed stocks

Some investors may also have realized that the stock market crisis of September, which was the worst month of 2021 for the market, may have created good values ​​for bargain hunters.

“We did a lot of buying in September. Every time there is product on sale it feels good,” said Pepper Anderson, President and CEO of Chilton Trust.

Investors should also keep an eye on what’s going on with so-called memes stocks, according to Dan Pipitone, co-founder and CEO of brokerage firm TradeZero.

Companies like GameStop (GME) and AMC (AMC) had gravity-defying races earlier this year thanks to the love of traders on Reddit.
Today, a blank check company that is considering merging with Donald Trump’s social media company is storming the market. Digital World Acquisition Corp., a special purpose acquisition company (SPAC), has climbed nearly 600% since Oct. 20, though it is now more than 25% below peak levels.

Interest in Trump’s SPAC is a clear sign that average investors are once again loading individual stocks, Pipitone said. Apparently, traders weren’t deterred by the market liquidation in September.

Still, some fear that the market rebound – which has taken stocks to record highs – may be a case of going too far too fast.

Anderson warns there could be more difficult comparisons going forward given the strength of earnings so far. She said the economy and earnings may start to mature, so investors need to be more careful.

“Anytime you have a rally like now, which is driven by earnings revisions, there are diminishing returns,” Anderson said. “This is when you have to think about quality actions.”

Others agree that the overall market looks a bit sparkling.

“You can take advantage of high prices now, but when they get too far ahead, sooner or later you get a correction,” said Marco Pirondini, portfolio manager at Amundi US.

That said, Pirondini also pointed out that stocks remain more attractive than other assets like bonds, currencies and commodities, in large part due to low interest rates and strong corporate results.

“The profits have been exceptional, so it’s normal to have enthusiasm in the market,” Pirondini said.

This is why investors should keep a close watch on the Federal Reserve. As the Fed prepares to cut or cut its bond purchases, it could push up long-term bond rates. The Fed could then consider raising short-term rates next year as well. This could put pressure on profit margins.


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