The U.S. stock market has been showing a massive positive tendency with the closing of October. On the other hand, some of the experts are also predicting ‘November to be a complete meltdown on the U.S. and world markets’.
The DJIA (Dow Jones Industrial Average) accelerated 8.5 percent in October and U.S. equities made their largest increase in 4 years this month in spite of most market participants being on the other side of the trade according to the statistics, released on Friday. Who knows? May be this could be a sign of better things to come in November or maybe the opposite one!
According to a few experts, the actual variable factor in October’s stock market rally was the positive opportunity that the U.S. Federal Reserve is not going to increase the interest rates in 2015, whereas it was anticipated just as opposite previously. Coming next the employment statistics release of September, in which it can be seen that only 142,000 jobs were initiated. At first on 2nd October, the stock market rallied and new jobs were way inferior to the consensus, which projected of 203,000 jobs. This phenomenon resulted in a series of fright in buying and all the prominent sectors, like energy, industry and materials came up as October’s best performers, despite their sluggish performance in August and September.
As all of the broader U.S. economic statistics indicated to certain duration of softness, many of the investors continued buying in September. Through the end of the month, the statistics remained moderate, because quarter three GDP growth was at 1.5% with and this is below the analyst anticipation, 1.7% and also less than half of quarter two’s 3.9% growth. In accordance with the logical analysis from Macroeconomic Advisers, it is expected that quarter four GDP growth would be at 2.2%. In addition to that, the increasing rate has remained feeble, that is acting like a strong catalyst to the Fed to retain the rates at an approximate zero level.
If we consider the negative sides of the whole situation, the previous selling stock market tendencies predict that the positive tendency of October might not carry on apparently in November. The Bank of Japan had made a shocking decision that its bond-buying initiative would not be changed and its ultimate goals were pushed back for attaining 2% raise from belated 2016 to the beginning of 2017. On Wednesday, the Fed discharged a brand new policy statement, in which the language became more aggressive and apparently indicated to the opportunity to raise in interest rates in December. As a result, many of the analysts remained ignorant and the future market probability of December rate increase are at 50-50 right now.
If the economic statistical tendency becomes positive day after day with us, entering November, as per the experts’ beliefs, the stock market may start gliding again. And the reason behind it is the investors increasing concerns that there is still a possibility for the interest rates to rise in 2015.