October has been a historically bad month for the US stock market. Dropping 8.8 percent before Halloween. If that isn’t scary enough, the market’s performance over October has been its worst since the last 9 years, since the financial crisis of 2008, and many believe that the worst is far from over. Could the market’s performance throughout October spook investors away from slumping shares and have them running toward precious metals?
For the month, the Dow is on track to shed 6 percent of its value, the S&P 500 is off 4.7 percent. The Nasdaq, which has lost 10 percent from a recent peak, is now down 10.3 percent so far during this month, officially placing it in correction territory. Amidst the chaos, investors have watched while precious metals fare well over the same period of time.
Also, many experts and pundits think that the market won’t settle itself any time soon, despite significant gains in European markets on Monday, and IBM’s $33 billion acquisition of Red Hat Inc. However, IBM shares closed Monday’s trading down 4.1 percent to $119.64, the lowest close since February 11, 2016.
“I don’t think we’re quite settled down yet,” veteran trader Art Cashin, UBS director of floor operations said on CNBC late-morning on Monday.
Major drivers of market sentiment like the popular tech and Internet-related constituents of FANG, Facebook, Amazon, Netflix and Google parent company Alphabet Inc., all ended in the red and are still under pressure at the beginning of the final week of October.
Shares of Amazon were on pace to enter the bear-market territory, down at least 20 percent from a recent peak, if you needed any more reinforcement that the uptrends are coming to a halt as we approach the end of the year. On top of that, the average stock in the S&P 500 has fallen by at least 20 percent, as well.
If shares of Amazon, one of, if not the most, influential companies, continue to consistently fall, which they have over the past 18 months, the market will undergo some serious downturn which could have a domino effect on other FANG companies. These factors and many others mentioned here before have given investors cause to believe that the worst is far from over for equities.
Stephen Auth, chief investment officer at Federated, describes the near future as bleak. “As for the very near term, it hard to see a sustained rally for the next few weeks.”
And the market is performing this way despite strong growth, record low unemployment, and favorable government policy. And though it is difficult to predict a “market downturn,” there are plenty of factors weighing in on this market to possibly cause one. Many experts point to a combination of rising interest rates, a stronger dollar, geopolitical drama, and the persistently ongoing US-China trade war as possible catalysts for a significant market downturn.
Investors are preparing themselves for further downside in share prices, and a possible longer-term, and long overdue bear market after nearly a decade of relentless Fed-fueled price appreciation. Fed chairman Jerome Powell appears intent on continuing to hike interest rates until he buries the bull market. With many believing that the last rate hike may have been one too far, what affects might another rate hike cause if and when the Fed, as promised, raises rates once again in December?
There could also be even more political uncertainty in the upcoming future as German Chancellor Angela Merkel announced that she would not be running for any political office again after her term ends in 2021. This is a decision that could eventually ripple through global markets, even as European stocks are performing better now because the European market is contending with Britain’s exit from the European Union and Italy’s budget clash, while the European Central Bank is attempting to make an end to its easy-money policies.
In comparison to a fairly rocky stock market over the past 2 weeks or so, precious metals remain stable in spot price with relatively little change.
Gold and Palladium are maintaining their stronger standing amongst precious metals with Platinum performing well heading deeper into fall. While gold ended slightly lower on Tuesday kept under pressure by a stronger dollar as well as gains in the benchmark US stock indexes, silver prices did climb after Monday. Gold prices have eased as the dollar finds support amidst worries over slowing economic growth and fears that the US-China trade war could once again intensify.