The Stock Market – October 2020

October was the worst month since last March, with the S&P 500 down 3.5%.  The Dow Jones 30 index was even worse, down nearly 6%.  For all of 2020, the Dow Jones was down 7.1%

What was the reason for the poor performance?  In one word, uncertainty.  Uncertainty about the elections, uncertainty about the virus and uncertainty about the fiscal stimulus package.

• The Presidential Election.  The biggest uncertainty is the election.  Not only is there uncertainty as to who will be elected president, but when will election results be known.  However, if the winner is determined quickly and the other person concedes, there could be a nice market rally.

• The Senate Election.  Another worry is that the Senate election results might not be known and could drag on.  If so, we might not know which party holds a majority or if the Senate and House are split.

• The Virus.  Will there be more lockdowns?  When will there be a vaccine for Covid-19 so businesses and we can go back to a more normal existence?

• Fiscal Stimulus.  Democrats and Republicans failed this week to make any progress coming up with a new fiscal aid package before the election.  This put pressure on the stock market along with the other uncertainties.  But I believe that shortly after the election, regardless who is elected, there will be a fiscal stimulus, benefitting the market.

Bottom Line:

With these uncertainties looming over the market, I expect it to continue to be volatile through election week or until election results are clear.  Hang in there for a bumpy ride.

For information on what a Trump or Biden win will mean for the stock market, visit What a Trump or Biden win means and What a Trump or Biden win means – Part 2 .