FX Evolution: Will October Actually Be Bad for Markets?

Financial markets skated through September unscathed. The start of an interest rate cut cycle allowed stock to break higher in what’s historically the worst month of the year. However, for October, it’s a different story.

October is the second-worst performing month of the year. Even worse, it’s also the month that tends to have market crashes. And being the month before a presidential election, investors should expect a high level of volatility.

After September’s rally, stocks entered the month in overbought conditions. The selloff on October 1 was related to geopolitical fears, but also reflected the market’s overstretched conditions.

That’s reflected in terms of the market’s greed and fear. The market was well into greed conditions, as investors were betting on the economy avoiding a recession for now.

Typically, if the economy can avoid a recession, markets should be higher in the next three and six month period.

China’s push for new stimulus measures could help boost that higher too.

So, while October may be volatile, markets are still structurally set for further gains going into 2025. Investors and traders may want to use any market weakness over the coming few weeks to position themselves.

It’s also good to use the next few weeks to look for any potential change to that longer-term uptrend.

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