October often brings volatility to the markets. But saying that domestic equities performed well last month may be an understatement. September’s positive performance continued in the 3 major domestic indexes, with each rising at least 2%. In fact, the NASDAQ ended on a record high with its 4th monthly gain in a row. The S&P 500 and Dow both grew for the 7th straight month.
What was backing up this market performance? Positive economic data.
Throughout October, we received reports on different sectors’ performance in September. From housing to consumer spending, many of the updates showed ongoing economic growth.
For example, new home sales jumped a whopping 18.9% in their latest reading—beating expectations. Economists anticipated that new home sales would drop in September. Instead, the sector had its best performance in nearly a decade.
On the manufacturing side, new durable goods orders increased for the 2nd straight month. Orders are now 8.3% higher than they were this time last year. In other words, business investment is expanding.
The most recent corporate earnings reports also support this perspective. By October 31, 73% of companies that had released their 3rd-quarter earnings results beat expectations.
And businesses aren’t the only ones experiencing growth. The most recent reports also reveal a rise in personal income. And consumer spending reached its fastest monthly pace since 2009.
With this positive data, the 3rd-quarter’s economic growth shouldn’t be too surprising. But the readings were still higher than many people anticipated. In October, we received the initial report of 3rd-quarter gross domestic product, or GDP, and it strongly beat expectations. The economy grew by 3% between July and September—which means we just experienced the fastest 6 months of economic growth in approximately three years.
And consumer confidence is growing in tandem. The Conference Board—which reports on consumer confidence each month—said its October readings beat expectations, reaching the highest level since December 2000. The report indicates that a strong job market and better business conditions are increasing many Americans’ confidence.
While I am happy to report these details from October, I also want to remind you to avoid bringing emotions into investing. I understand how hearing that the economy is growing more quickly can feel encouraging. But in both good and challenging times, maintaining a strategic, long-term focus is key.
As we look ahead, we may receive important perspectives on both tax reform and monetary policy this month. With each development, we will continue to examine how economic trends and data may affect each client’s financial life.
If you have any questions about how the recent economic reports could impact your long-term goals, we are here to talk.
That wraps up our educational economic update for this month.
Disclosure: While we believe the information in this report is reliable, we cannot guarantee its accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining markets. The indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results.