Daily Capital

October Market Recap: Stocks Drop with Renewed Shutdowns, Election Angst

Rising coronavirus cases, inability to pass a stimulus bill, and pre-election jitters combined to drive stock prices lower in October. For a second consecutive month, technology shares underperformed the broader market while small cap companies were able to post modest gains.

Despite the election gobbling up most media attention in October, markets were likely more consumed by the frightening spike in virus cases in Europe and subsequent shutdown measures. England closed restaurants and bars, and France effectively initiated quarantine, though schools remain open. As was the case in the spring, we can assume that the trends in Europe will repeat in the U.S. after a few weeks of lag time. We should not assume, however, that market reaction will be the same — either at the macro level or among sectors and styles. Much of the accelerated transition away from in-person to digital has already been priced into stocks during Q1.

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Lagging Election Results Likely to Increase Daily Volatility

Leading up to the election, there was increasing expectation for a blue wave, and with it a massive stimulus package and potentially higher corporate taxes. While actual impact is always impossible to predict, many investors believed this would lead to higher interest rates and higher inflation, favoring value companies at the expense of the mega techs. We still do not know the full outcome, but the blue wave did not happen on election night.

While we can all guess, there is little clarity on what any election results will mean for overall market direction or sector winners. Many of the initial predictions from 2016 turned out to be backwards.

At the time of this writing, it does appear likely the election will be contested for days or weeks, with likely increased daily volatility until there is clarity.

 

 

 

 

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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