Strong Dow Gains in Oct. & Promising Nov. Due To 2 Events

The overall performance of the stock market was strong during the month - the $DJIA(.DJI)$ accumulated a 14% gain in October.

1. Dow hit a 46-year record in October 

Dow's October's 14% gain was historical:

• the largest gain since 1976
• one of the best October performance in the index's history
• outperformed the Nasdaq by about 10 percentage points, the largest one-month difference since February 2002.

Compared to the Dow, the $S&P 500(.SPX)$ and $NASDAQ(.IXIC)$ were flat in October: the S&P 500 rose 8% for the month, while the Nasdaq gained just 3.9%.

The strong performance of the broad market is closely related to the following reasons

1. Market was oversold in September
2. FOMC blackout period from October 22–November 3
3. The dollar index retreated from its highs and move sideways

Data from tradingview

Investors are now betting that value stocks in traditional economic sectors ( banks, industrials, utilities and energy stocks) will outperform technology/growth stocks.

2. Which companies/sectors benefited from the Dow's gains in Oct.?

It was the "real economy" type companies and defensive companies like $McDonald's(MCD)$ contributed to Dow 's historical record.

If the market remains last month's rally, you can refer to the components of Dow.

$Caterpillar(CAT)$ $Goldman Sachs(GS)$ $UnitedHealth(UNH)$ $Amgen(AMGN)$ $McDonald's(MCD)$ $Honeywell(HON)$ $Chevron(CVX)$ $Travelers(TRV)$ $Visa(V)$ $JPMorgan Chase(JPM)$

3. Two events will determine the market trend in November.

In the coming days, two high-profile events are likely to set the direction of the November market.

1) Federal Reserve November interest rate resolution on Thursday.

Currently, Wall Street unanimously expects the Fed to raise 75 bps for the fourth consecutive time at this meeting.

Thus, investors should focus on Fed's signal about later rate hike path as market is divided on December's decision.

Market is divided on Dec's rate decision; data from cmegroup

Traders already expect the Fed to start slowing down in December. Bank of Canada last Wednesday has slowed the pace of interest rate hikes。

2) The 2022 US midterm elections on November 8th.

According to investment research firm CFRA,

the Q4 of midterm and the subsequent Q1 after midterm election are generally the two strongest quarters for US stock during a US presidential term (16 quarters in total). The S&P 500 records in average gains of up to 6.4% and 6.9%, respectively.

In addition, November has always been a strong month for US stocks. In 9 of the past 10 years, the S&P 500 has risen during the month.

Which company do you prefer in the Dow's components?

How did your portfolio perform in October?

Do you think November will continue this rally?

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