Fun Facts about October
- Birthstone: Opal & Pink Tourmaline
- Flower: Calendula, aka Marigold
- Zodiac signs: Libra and Scorpio
- October was named after the Latin word ‘octo’ meaning “eight”. This is because October was originally the eighth month of the year. It was only the eighth month until July and August were introduced to the Roman calendar by Julius Caesar and Augustus and it became the tenth month in the year.
- October’s equivalent in the Southern Hemisphere is April.
- Columbus Day is always on the second Monday in October. This year, that day is Monday, the 11th.
- The Statue of Liberty arrived in the United States all the way from France in October 1886.
- October has seen more presidents of the United States born than any other month of the year.
Stocks suffered their worst month of the year in September. The S&P 500 dropped 4.8% for the month but is still up 14.7% for the year. The drop broke a nice streak of seven straight positive months. Q4 historically starts off a little shaky but turns out to be one of the best times to be in the market, speaking on a seasonal basis.
Supply chains are still a mess worldwide. The Pacific Ocean off the coast of Los Angeles is a container ship parking lot right now. If you bought something coming from overseas recently, don’t expect it to get to your house until 2022. It looks like the most popular gift this year for the holidays will be gift cards.
Covid is still creating a headache for the markets as waves of the disease ebb and flow around the globe. Fortunately, we are seeing a nice downtick in hospitalizations and deaths here in the states. Hopefully, we will soon have enough people vaccinated that we won’t see another mutation creep back in.
The end of September marks the beginning of Q4, which means earnings season is starting shortly. What happened in Q3 isn’t that big of a deal for investors. It’s what companies say about Q4 projections that really moves the markets.
The market does have a few headwinds, but these can turn into tailwinds quickly once we get supply chains repaired and more of the population vaccinated.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices across the debt spectrum fell smartly throughout September as inflation worries grew. Now that it looks like the Fed is going to start tapering their asset purchases, meaning buying less government bonds, demand for these assets will shrink. This, in turn, will cause bond prices to drop and their yields to rise. So, please be cognizant of this when buying bonds with a maturity date greater than 1-2 years. In this type of interest rate environment, you can expect to lose principal unless you hold the bonds to maturity.
The 10-year US Treasury note is now yielding 1.5% and the 30-year bond is at 2.06%, both higher than last month. These rates should continue to rise as the fed pumps the brakes on buying so many of these bonds every month.
Interest rates were flat to just slightly higher in September. CD, money market, and savings account rates are still historically low. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation.
Currently, the average savings account is paying 0.29%, a slight bump higher from last month. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value. Plus, you have to pay taxes on that interest.
The 1-year CD interest rate is now averaging 0.46%, the same as last month. The 5-year CD rate inched up slightly to 0.73%. You’re certainly not getting rich owning these. Hopefully, these rates will continue to head higher over the next few months.
Mortgage rates changed very little during the month of September. Currently, the 30-year rate sits at 3.03%, about the same as one month ago. Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Home prices continued to break records for the fourth month in a row as supply chain issues delay deliveries of building materials (and pretty much everything else). We should start to see rates rise but so far, there has not been much movement at all.
Oil prices headed back up in September after it first down month (August) since early spring. The price for a barrel of oil went up by 10% to settle at $75.05 at the end of September. Prices for the year are up an impressive 55%.
Since almost all materials, products, etc. need oil to move, prices for almost everything have risen steadily over the year. This, coupled with wage increases and high demand, has really stoked the inflation embers.
Gasoline prices crept up in September in response to the increase in the price of oil. August. Prices at the pump are averaging about $3.19 per gallon, about 3 cents higher than a month ago. Mississippi has the cheapest gas right now, at $2.82. California has the most expensive at $4.40 per gallon. FYI, a year ago, we were paying $2.18.
Gas prices in England are really out of control and the main reason is because they don’t have enough drivers to get the petrol to the filling stations. Hopefully, that won’t happen over here.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Infrastructure Bill: The House of Representatives delayed voting on this bill because the Democrats are feuding internally. Hopefully, they can iron out whatever their problems are and get something done by the end of the year. I think the market knows this bill will get passed so we should see a nice leg up for industrial, materials, and heavy machinery stocks when it actually does.
- Coronavirus: The data is now confirming that we did reach the peak transmission of the covid delta variant in late August, which is great news. Unfortunately, we are still averaging almost 1,400 deaths per day. Hopefully, this rate will come down as well. The vaccination rate slowed down in September, which now shows that 65% of the U.S. population has received at least one dose, up from 62% last month. New vaccine mandates around the country should help improve this number. I think if we add this amount of the population to the number of unvaccinated people that caught covid and survived, we could be closer to 80% of the population that has some form of immunity. This might be enough to slow down the virus mutations, which would help us turn the corner on the pandemic. No doubt a positive for the economy and the markets.
- Fed & Inflation: It looks like the Fed is going to start slowing down (tapering) its monthly bond purchases by the end of this year. I’m guessing that will go on until mid-2022. After that, we could see them start to raise interest rates, especially if our economy continues to recover from the pandemic. This is something that investors should monitor closely, in my opinion, since the current low-interest rate environment has been providing a solid floor for stock prices over the last several years.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
