What did the end of October meant for stocks across the globe
There have been many financial crashes in the past associated with October such as Black Tuesday and Thursday (1929), Black Monday (1987) etc. This phenomena is known as ‘October effect’. Moreover, in US and Canada, as the fiscal year ends in September, most companies are correcting the otherwise tweaked numbers and inflated statements which showed their performance to be better for the reporting purposes. Another reason could be that as September marks the end of summer, investors might need greater cash for the changing weather shopping, back to school expenses etc. causing them to liquidate the stocks. For Canadian stocks, the interest rate hike from 1.5% to 1.75% by BOC and the consequent market sentiments could also serve as one of the possible explanations for the drop in equity prices.
October 2018 has been volatile for the global stock market with Dow Jones crippling by 600 points last week. Nasdaq and S&P fell by 11.7% and 8.9% and the prices of most tech stocks like Netflix, Facebook, Amazon also swooned. The MSCI All-Country World Index dropped by around 8% in October indicating a poor monthly performance since the past 6 years.
Nevertheless, it seems that Halloween marked the end of the red zone for stocks as Dow Jones went up again. Similarly Nasdaq and S&P rose by 1.8% and 1.1% yesterday due to the improved dialogue regarding the trade agreement between US and China as well as the conversation regarding G-20 with Argentina and North Korea. Today, the performance of market shows its recovering from the last month’s plunge but it could also be a ‘weekend effect’. Lets see where the stock prices and earnings go next week.
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