Along with being a profitable month for Wall Street as evident from data from moneychimp.com, October is traditionally the most volatile. A consensus carried out from 1950 to 2017 has revealed that the month ended up offering positive returns in 42 years and negative returns in 26 years, the average return being positive 0.78%.
But the month put up the S&P 500 with more daily moves of at least 1% on average than in any other month, per data from CFRA Research dating back to 1950. The data revealed that 10.3% of such moves in a year happen in October, per CNBC.
The month has witnessed some of the appalling market crashes with the most horrifying being the 1987 one,“which saw the S&P 500 lose more than 20 percent of its value in one day.” The 1929 crash and the 2008 financial crisis' acute sell-offs also took place in October.
October 2018 on Correction Mode
This October is no different with stocks crashing mainly on rising rate worries. To add to the woes, the International Monetary Fund (IMF) lowered its global growth forecasts on concerns between the United States and its trading partners. The IMF now expects the global economy to expand 3.7% this year and next — down 0.2 percentage points from the previous forecast (read: IMF Cuts Global Growth Forecast: ETFs in Focus).
SPDR Dow Jones Industrial Average ETF (DIA - Free Report) is down 5.6% this month (as of Oct 23, 2018), SPDR S&P 500 ETF (SPY - Free Report) has retreated 6.2% and Invesco QQQ Trust (QQQ - Free Report) is off 6.9%. Morgan Stanley apprehends more selling pressure on Wall Street due to falling liquidity and growing concerns about peaking growth.
In short, rising rates, effect of tariff threats on global growth and uncertainty before the midterm elections have been hazardous for the U.S. equity market. To circumvent the ongoing equity market volatility, investors may find the following ETF options useful.
iPath B S&P 500 VIX S/T Futures ETN (VXXB - Free Report) ) – Up 35.9% in October
Keeping the instability in October in mind, volatility ETFs should be in focus. The underlying S&P 500 VIX Short-Term Futures Index Total Return offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index.
iShares MSCI Global Gold Miners ETF (RING - Free Report) – Up 9.8% in October
As markets turn edgy, safe-haven assets like gold tread higher. Gol bullion ETF SPDR Gold Shares (GLD - Free Report) is up about 3.4% this October. And since mining companies normally act as leveraged plays of the underlying metal, investors can keep a track on gold mining ETFs (read: Wall Street Sees Worst Day in 8 Months: ETF Winners & Losers).
AdvisorShares Dorsey Wright Short ETF (DWSH - Free Report) ) – Up 9.0% in October
The fund is actively-managed and it involves buying securities that have appreciated in price more than the other securities in the investment universe and holding those securities until they underperform.
AGFiQ U.S. Market Neutral Anti-Beta Fund (BTAL - Free Report) – Up 5.2% in October
Investors who want to shift focus to low-beta stocks during this uncertain market environment can consider adding BTAL ETF to their portfolio. The fund follows the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index.The index identifies the lowest beta stocks and goes long on them, while at the same time going short on the highest beta stocks (read: 5 Defensive ETFs to Survive Global Market Rout).
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