The October Economy

Now that October has been put to bed, reports are starting to come in about how the economy fared last month. First and foremost is the jobs report, which contained a number of reasons to be optimistic about this economy and how well it’s performing. Second, we have the stock picture, which was almost universally positive. A few dark spots aside, October was the best month for stocks in 4 years. All of that adds up to an optimistic picture going into the winter holidays, and the retail bonanza that comes with them. Nobody needs to be told that that’s a great sign for what was a struggling economy.

The Jobs Picture

The jobs picture in October was largely positive, with more and more people getting back to work.
Unemployment continues to be at its lowest rate in over 4 years, and more part-time employees are switching over to full-time. The bad news is that wages have actually fallen this past month, and that spending was only up 0.10%. Whether or not that will have a large impact on Christmas spending is yet to be seen, but stagnant wages typically mean lower consumer spending. Although the picture is somewhat mixed, there is plenty of reason for optimism. Seasonal hiring is about to begin, and that will drive unemployment even lower through the holiday season. People will be getting more overtime, and bringing home bonus checks which will help to drive spending.

Rising Stocks

There’s no two ways about it, October was excellent for stocks. All of the major indices were up around 9%, and many surprising companies presented a good quarterly earnings report. One of the biggest shockers was McDonald’s (MCD), which turned a profit for the first time in two years. It wasn’t just McDonald’s that reaped the benefits of a strong October though. Amazon (AMZN) outperformed the already-booming October markets, and so did General Motors (GM). General Motors, which is still struggling to meet its IPO price, was up over 9% in the past month and shows no signs of slowing down now. Other big winners in October were Mattel (MAT) and Sonic (SONC). Mattel is a big surprise, because it relies so heavily on overseas sales to turn a profit. Still, it outperformed the market and had an excellent earnings report this quarter, all things considered. Sonic, a regional fast-food chain, is in much the same boat as McDonald’s. People are out spending more on fast food and toys, which is a good sign that this November and December’s retail season may be a big one.

Going Into November

As we move into November, stock are continuing to move upwards, albeit slowly. The Dow is poised to cross the 18,000 point mark, which hasn’t been done since before the summer. Markets are poised to continue to rise as the month wears on. The summer doldrums are clearly over, and the market is ready to post some big gains. November promises to be a transitional month, and depending on how it goes we’ll have a clearer look at how the holidays will shake out, and whether or not the Fed will act to raise the prime rate this year. Many analysts think that a rate hike is coming this December, and October’s stellar stock performance and solid jobs numbers could be a big part of the reason why it happens.
Published on Nov 7, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2016. Content published with author's permission.

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