Never A Dull October

Equities finished higher for the week, despite concerns over valuations and regional banks. October is known for its volatility, and this year hasn't disappointed so far.

Equities pulled back 1.5% in the first couple of weeks of this month and the media acted like it was the next bear market. However, a survey of crashes that have occurred in the month of October - 1907, 1917, 1929, 1987, & 2008 to name a few - shows that the average decline was about 16%. After Friday's results, however, the S&P 500 is down only -0.3% for the month. Volatility is the toll we pay to invest, and investing has handsomely rewarded investors thus far in 2025. The large concern on the minds of investors at the moment involves regional banks and some poor loans made by the sector to businesses whose stock prices have declined or who are filing for bankruptcy. Yet, when we compare the current situation to the March 2023 regional banking crisis, credit spreads jumped 30% in just two weeks while the current spreads have only risen about half as much. It would seem it's a little early to panic just yet.

It’s early in Q3 earnings season, but so far, 86% of S&P 500 companies have reported earnings above estimates, which is above the 5-year average. Certainly corporate

spending is high due to capital investment in AI, but individual spending is strong, as well. Redbook Sales continue to point to a resilient consumer. Last week's reading was +5.9%, which remains well above average. Unlike in 2008, when sales were trending below average and were actually flat by February, 2008 before going negative.

According to the last 5 bull markets, we are in a relatively early stage. The average of the last 5 bulls is approximately 7 years, while we only just surpassed year 3. That

doesn't mean that the ride ahead will be without its bumps. October is a month in which the VIX (volatility index) tends to rise. Over the last 20 years, the VIX has closed higher than it opened in October at least 55% of the time. So far, the VIX is up 29% in the first half of October. The good news is that November is a month in which the VIX tends to decline. Only in 26% of the last 20 years has the VIX closed higher than it opened in the month of November. According to seasonality, this week tends to be a choppy one. However, don't stray off course from your investment plan due to a few days of increased volatility.

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

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