October was a mixed month for investors. The economy continued to grow, but higher energy prices, inflation concerns, and uncertainty about artificial intelligence (AI) spending weighed on markets.
Technology stocks struggled, while other sectors performed better. Bond yields also moved lower as investors became more cautious, helping bonds during the month.
Technology Stocks Declined While Other Sectors Gained
Technology and communication services stocks had a difficult October, with both sectors falling more than 7%. Investors grew more concerned about how much money companies were spending on artificial intelligence and whether that spending could continue at the same pace.
Other parts of the stock market performed better, particularly sectors that had received less attention during the technology rally. This helped keep the broader market relatively steady despite the decline in AI-related stocks.
Bond Yields Fell as Investors Turned to Treasuries
Bond yields moved lower in October, even though inflation and energy prices remained elevated.
Concerns about AI-related investments and developments overseas led more investors toward U.S. Treasury bonds. That increased demand helped push yields lower, including the 10-year Treasury yield.
When bond yields fall, bond prices generally rise. As a result, longer-term bonds performed well during the month.
The Federal Reserve also kept interest rates unchanged in October, choosing to wait for more economic data following its September rate increase.
Higher Diesel Prices Added to Inflation Concerns
Oil and diesel prices remained elevated in October as conflicts overseas continued to disrupt energy supplies.
Diesel was a particular concern because it is widely used in trucking, freight transportation, and agriculture. Higher fuel costs make it more expensive to transport and produce goods, which can lead to higher prices for consumers.
The effects can vary by region. In Connecticut, households that rely on heating oil may be especially affected by higher fuel prices, while farmers across the country face increased costs for fuel and fertilizer.
Economic Growth Continued Despite Slower Hiring
The U.S. economy continued to expand in October, although some areas showed signs of weakness.
Manufacturing and services activity continued to grow, and industrial production increased. Businesses also continued investing in artificial intelligence and data centers.
The job market was less encouraging, with only modest job growth. At the same time, producer prices rose sharply, largely because of higher fuel costs.
Overall, the economy continued to grow, but inflation and slower hiring remained concerns.
What October's Market Performance Means for Investors
October showed how different parts of the market can move in opposite directions. Technology stocks declined, other sectors gained ground, and bonds benefited from falling yields. These differences highlight why diversification across investments remains important.
If you want to discuss how today's market conditions may affect your investments or retirement planning, you can schedule a complimentary introductory meeting with our team in Glastonbury or Wilton, Connecticut.
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Tom Hine is a CERTIFIED FINANCIAL PLANNER® professional and owner of Capital Wealth Management. With over 30 years of experience, Tom works with individuals and families on financial planning, retirement strategies, and investment management. He has a particular passion for special needs financial planning, shaped by his personal experience helping raise his sister Amy, who was born with a severe chromosomal condition. Tom understands the emotional and financial challenges that come with caring for a loved one with disabilities and helps clients navigate complex issues like preserving government benefit eligibility, coordinating Special Needs Trusts and ABLE accounts, and long-term care planning. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Schedule a complimentary introductory meeting with Tom.
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.
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