Traditionally, October is the most volatile month for the broader market. The daily percentage change in the month is 1.44% compared with 1.08% for the other months. Historically, the period between the end of April and the end of October, had been the worst “six months” for the Dow and the S&P 500, while the period between June-end and October-end is considered the worst for the Nasdaq.
This bearish trend, however, hasn’t played out so far this year. All the major indices continued to scale record highs on improved corporate earnings, the chugging along of the U.S. economy and the rise in oil prices after the decline in the first half of the year. Oil prices moved north after major producers said that the global market was on its way toward tallying international demand-and-supply levels.
Hopes that President Trump is making strides with his new tax plans also overshadowed a slew of negative developments including catastrophic hurricanes, threats of war from North Korea and cyber breach at credit bureau Equifax.
Given such positives, the month of October is not likely to put an end to the bull market. Equities, moreover, have a reputation of maintaining gains as the fourth quarter is usually the strongest. This calls for investing in some rock-solid stocks this month for better gains.
Corporate Earnings Encourage
Total Q2 earnings for the S&P 500 index are up 11.1% from the same period last year on 5.5% higher revenues. This marked the second straight quarter of double-digit growth. Earnings growth is also expected to turn positive in Q3. Total Q3 earnings are poised to be up 3.2% from the same period last year on 5% higher revenues.
For the full year, total earnings for the S&P 500 are expected to be up 7.4% on 4.6% higher revenues, which would follow 0.7% earnings growth on 2.1% higher revenues in 2016 (read more: Start of the Q3 Earnings Season).
Economic Recovery Solid
Meanwhile, the U.S. GDP expanded 3.1% in the second quarter, the fastest in more than two years. It is also up slightly from a previously reported 3%. An uptick in consumer outlays and business investment drove the upside.
Increased spending on goods and services pushed consumer expenditure up 3.3% in the said quarter. Consumer spending – the biggest driver of the economy – picked up on higher income for consumers and low inflation.
Trump’s Tax Policy Proposals
Trump has urged Congress to move fast with the lowering of corporate taxes and had recently held a bipartisan group of House members at the White House to discuss a tax deal. He has been working on a major tax overhaul in more than three decades. Ever since 1986, the tax code hasn’t been restructured, when President Ronald Reagan along with a divided Congress broadened the tax base and slashed marginal tax rates.
Trump proposed a multi-trillion-dollar tax cut that would boost the U.S. economy and drive corporate profits. Such a tax cut included trimming of the business tax rate to 20% from 35%. Low corporate tax will benefit businesses of all sizes, as most of them will see the improvement in their bottom lines.
5 Top-Performing Stocks for October
October may be a rocky month for the stock market. But, as mentioned above, there are positives that may propel the broader markets. We have, thus, selected five stocks that have not only gained, traditionally during the rough trading month of October but also flaunt a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here is a closer look at them:
|Company Name||Average Return|
|Percentage of Positive Returns|
|MasterCard ||7.37% ||7.76% ||90%|
|Raymond James Financial || 4.65% ||7.16% ||90%|
|Constellation Brands ||2.66% || 6.34% || 90%|
|Amphenol Corporation ||2.32% ||3.05% ||90%|
|Royal Caribbean Cruises || 5.72% ||9.84% || 80%|
Mastercard Inc. (MA - Free Report) is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Zacks Consensus Estimate for its current-year earnings rose 1.4% over the last 60 days. The company’s expected growth rate for the current and next quarters are 13.2% and 27.7%, respectively.
Raymond James Financial, Inc. (RJF - Free Report) , through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products in the United States, Canada, Europe, and internationally. The Zacks Consensus Estimate for its current-year earnings climbed 0.2% over the last 60 days. The company’s expected growth rate for the current and next quarters are 3.1% and 33.2%, respectively.
Constellation Brands, Inc. (STZ - Free Report) produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. The Zacks Consensus Estimate for its current-year earnings inched up 0.1% over the last 60 days. The company’s expected growth rate for the current quarter and year are 21.9% and 20.7%, respectively.
Amphenol Corporation (APH - Free Report) , together with its subsidiaries, engages in the design, manufacture, and marketing of electrical, electronic, and fiber optic connectors worldwide. The Zacks Consensus Estimate for its current-year earnings rose 0.3% over the last 60 days. The company’s expected growth rate for the current and next quarters are 7.7% and 4%, respectively.
Royal Caribbean Cruises Ltd. (RCL - Free Report) operates cruises under the Royal Caribbean International, Celebrity Cruises, and Azamara Club Cruises brand names. The Zacks Consensus Estimate for its current-year earnings rose 2.9% over the last 90 days. The company’s expected growth rate for the current and next quarters are 7.7% and 2.2%, respectively.
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