Market Bounced Back Friday But Caution Still Advised

October 15, 2018
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Slides in the stock market on Wednesday and Thursday of last week had investors hitting the brakes on new activity and taking inventory as prices tumbled. Wednesday was the single worst trading session since February, and although the losses on Thursday weren’t quite as bad, they still contributed to a significant slide that erased many of the gains from the last three months.

Even President Trump himself was disappointed by stock performance, and while admitting that he was waiting for a correction to happen, he still believed that rate increases from the Federal Reserve played some part in sending investor confidence downwards.

Friday was much better, with the NASDAQ Composite Index closing 2.29% up from the previous day. The Dow Jones Industrial Average also got back into the positives, closing 1.15% up from Thursday.

While the rebound on Friday wasn’t enough to cancel the losses from the previous two days, it was still a positive sign for investors, indicating that the worst could be over.

This week will be key to gain perspective of the stock market this month, but caution is still advised for any investor looking to either buy or sell this week.

October is Traditionally a Highly Volatile Month

October has been responsible for historic market crashes in 1907, 1929, and 1987. Volatility usually starts from the end of September, with stocks rallying again before November begins.

The Mid-Term Elections Will Cause Trouble for the Market

Most analysts agree that the November mid-term elections are having an impact on investor confidence. A shift of power in the house could have an impact on domestic finances. Volatility this October could be worse ahead of the elections.

The good news is that analysts are also confident that prices could pick up again after the uncertainty has passed.

If you’re thinking of offloading stocks today, then it could be worth waiting for a price rally at the end of the year. On the flip side, investors seeking bargain prices on popular growth stocks could possibly find the best prices early this week.

A Risky Month for Decision Making

Ultimately, there is never any certain way to predict when the market will swing. This was evident on Wednesday when prices came tumbling down. Due to heightened volatility and looming elections, caution is advised.

Waiting for data and longer trends is the safest way to operate this month.

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