Market Recap - October 2023

Jeff McClenning |

Stocks waver in October

October has been associated with frightening incidents in the financial world.  Perhaps this is because two significant stock market crashes that occurred in 1929 and 1987 happened in the month that sports Halloween.  However, it may surprise you to know that broad market indexes such as the S&P 500 have historically performed well in October (data provided by the St. Louis Federal Reserve).  Nonetheless, last month was an exception to the usual trend.

Key Index Returns




Dow Jones Industrial Average



Nasdaq Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-U.S.A*



MSCI Emerging Markets*



Bloomberg Barclays U.S. Aggregate Bond TR USD



Source: Wall Street Journal,, MarketWatch, Bloomberg
MTD returns: September 29, 2023–October 31, 2023 YTD returns: December 30, 2022–October 31, 2023

It can sometimes be challenging to pinpoint the ‘why’ behind market movements. This was true last month.  Are investors getting anxious about the economy?  Gross Domestic Product accelerated to a robust annualized pace of 4.9% in Q3, per the U.S. Bureau of Economic Analysis.  However, weakness in smaller company stocks, as illustrated by the sell-off in the Russell 2000 Index (these firms obtain their business primarily in the U.S.), might suggest there were some economic jitters.

In the broadest sense, market sentiment was depressed by rising bond yields, with the 10-year Treasury briefly exceeding 5%, marking its highest yield since 2007 (CNBC).  In part, “higher for longer,” as Fed officials have been fond of saying, is playing a role. By that, they mean they expect the fed funds rate will remain elevated for an extended period of time.

In part, the enormous federal deficit and the accompanying need to borrow an ever-increasing amount of cash jolted the bond market.  It is not easy to measure the precise effect of Fed policy and the federal deficit on yields. When a bond is bought or sold, there is no explicit justification for the transaction on the trade ticket. However, it is fair to assume that both factors are impacting yields to some degree.  For investors, all else being equal, higher interest rates and higher bond yields provide income but create stiffer competition for stocks.

War in the Middle East

On October 7, Hamas, a designated terrorist group by the U.S. and European Union, launched an appalling and unwarranted attack on Israeli citizens and the nation of Israel.  It is difficult to be clinical and objective following the tragedy. Real emotions surface. They have their place. But in this forum, our job is to analyze what is happening through a very narrow prism—i.e., how it might affect investors.  When such an event occurs, investors attempt to measure the potential impact on the U.S. economy.

So far, investors believe the violence will be contained. Oil prices, which briefly rose following the attack, ended the month slightly below where prices stood on October 6 (MarketWatch data).  Perhaps that is because past geopolitical shocks have not had a longer-term impact on stocks. Knee-jerk reactions are rarely profitable.  While what happens in the past is no guarantee of future performance, reviewing 23 separate geopolitical events since Pearl Harbor, the average loss for the S&P 500 on the first day was 1.1%, and the average pullback was 4.7%, according to LPL Research.

The 1973 Yom Kippur War led to the OPEC oil embargo, soaring oil prices and a steep U.S. recession, but it was an outlier. Today’s oil market is different, geopolitical dynamics in the Middle East are different, and the U.S. is a leading oil producer.  That said, any significant disruption in oil supplies would send the price of crude higher. Such an event can’t be completely discounted.

Investor’s corner

We always emphasize that you should control what you can control.

  1. Long-term performance is about time in the market, not timing the market.
  2. Your behavior plays an important role in long-term returns. How do you react when stocks soar or falter? Does euphoria lead you to become too aggressive? Does market weakness push you to sell after equities have already faltered?
  3. What is the best approach to your financial plan? Your mix of stocks, bonds and cash (and any other diversified asset classes) plays a role. Much will depend on your appetite to take on risk and your time horizon. Successful long-term investors recognize that a disciplined approach has been the shortest path to achieving one’s financial objectives. Your financial plan helps enforce that discipline.

It’s not something that is set in stone. Life events can create the need for adjustments, but the plan is your blueprint for financial success.

I trust you have found this review to be informative. If you have any inquiries or wish to discuss any concerns, please don’t hesitate to contact me or any member of my team.