by | Nov 2, 2022 | Newsletters

October brought a new round of higher prices, but investors started to believe that the Federal Reserve is getting close to pivoting to a loose monetary policy. So, despite the worse-than-expected inflation data, stocks managed to rally over the past month.

However, many big investing and banking pundits have given cautionary messages about the risk of further declines in stock prices. JP Morgan CEO Jamie Dimon issued a warning of a severe recession ahead and in the event stocks losing another 30 percent.

One of the hedge funds industry’s leading managers Ray Dalio continued to make unsettling statements about the economy and the stock market. According to the Bridgewater Associates billionaire, “Stupid economic policies have the United States hurtling toward a perfect storm of economic pain”.

Source: TradingView

Stocks

The stock market reached a recent low on September 30 and rebounded from there as sentiment for at least a slowdown in rate hikes began to rise. For October, the S&P gained 8.85 percent, the Nasdaq underperformed gaining only 3.9 percent, while the Dow Jones Industrial Average outperformed its peers and gained 13.95 percent.

The poorer performance of the Nasdaq index comes as tech stocks have failed to recover as well as other sectors. One of the worst hit stocks over the month was Amazon, whose earnings report on October 27 missed analyst expectations.

The stock dropped 13 percent on the day and although it recovered some ground, it ended the month down 11.67 percent. 

Real Estate

The real estate market cool-down continued its trend in October as home buyers face steeper mortgage costs as interest rates rise. Mortgage applications declined again by 4.5 percent after a decline of 2 percent the previous month.

Other data released during October also show the housing market may be cooling down further. The Housing Price Index fell by 0.7 percent after losing 0.6 percent the month before. While housing starts declined to 1.439 million from 1.566 million the previous month. 

Despite the negative news for the housing sector the Dow Jones Equity All REIT Index still closed up by 3.03 percent for the month.

Crypto

Cryptocurrencies in general continued to trade in a range for most of the month. However, the last few trading days of October saw a small breakout in the main digital coins like Ethereum and Bitcoin.

Bitcoin had been trading in a range between $18,800  and $19,500 since October 8. And on October 25, bullish momentum pushed the gold of crypto out of that range, with a close at $20,086. At the time of writing, Bitcoin had ventured higher at $20,516 for a gain of 5.74 percent on the month.

A report issued by analysts at Bank of America showed that the correlation between the price of Bitcoin and stock had flattened out and was declining from its highs in recent months. They also found that at the same time Bitcoin’s price correlation with gold was increasing.

The analysts read this as an indication that investors may have started seeing Bitcoin and other cryptocurrencies as a safe haven again.

Wrapping up

To reduce the overall risk of your portfolio we recommend investors allocate to a wide variety of alternative investments. Assets such as precious metals, real estate, or hedge funds have little or no correlation to stock market returns. 

To invest in these assets in a tax-enhance environment you can take advantage of a self-directed IRA. Several companies offer professional services to help you run and manage your IRA. You can read our reviews on the top self-directed IRA companies here.

Gino D'Alessio

Gino D'Alessio is a Broker/Dealer with over twenty years experience in various OTC markets such as Bonds, FX and Derivatives. Currently a Financial Markets and Investments Writer & Analyst