A Very Big Month

October lived up to its reputation as a bear-killer this year, as the month’s low happened on the first day and stocks spent the remaining 30 days screaming higher.

Even though we mostly know better, everyone still wants to know why.

Some point toward the record cash hoards built up by institutions, some say it was the massive short positions being unwound by performance-chasing hedge funds during September, some point to a sentiment shift from the Fed’s standstill and others cite the not-so-bad tone of earnings season.

I’d say there’s no single “reason” for the sudden burst of buying that drove an 8.5% gain for the S&P 500 in October. Sometimes a lot of things come together at once and there is no silver bullet gauge that allows you to call it in advance.

Below, my chart indicating the month-long rally for the S&P 500 in the top pane with the percentage of S&P 500 stocks above their 50-day moving averages in the bottom pane (a new year high, not too shabby).

spx oct

Eric Balchunas, who has the ETF beat for Bloomberg, tells us something remarkable about flows during the month:

U.S. Equity ETFs Brought in More Cash in October Than the Rest of the Year Combined

U.S. stock ETFs took in $10 billion, nearly double the $6 billion total they had attracted this year up until October. The flows were no doubt sparked by the Federal Reserve’s decision not to raise interest rates in September which helped trigger a sizable 8.5 percent jump in the S&P 500 Index. Up until this point, the U.S. equity ETF market might be described as ‘meh’ compared to international developed markets such as Europe and Japan where central banks in full-blown quantitative easing-mode attracting ETF investors like moths to a light. In October, the opposite happened.

Screen Shot 2015-11-02 at 9.40.36 AM

Josh here – Keep in mind that at the halfway point of October, flows were still negative for a lot of categories. That’ll teach you to ignore weekly fund flow information or, at least, to discount its importance for the future performance of an asset class.

In addition to the massive inflow for stock ETFs, Eric tells us that the inflow readings for international stock ETFs and for junk bonds / investment grade corporate bonds were also extraordinary. Hell, even emerging market stock ETFs managed a positive take of over a billion dollars net, after more than 7 billion flowed out from January to September.

Bottom line: It was a very big month and it came out of nowhere, as these things often do.

Source:

Five Wild Stats from October ETF Flows (Bloomberg)

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Bosch 2609256311 manuals commented on Jan 20

    … [Trackback]

    […] Here you can find 7733 more Information on that Topic: thereformedbroker.com/2015/11/02/a-very-big-month/ […]

  2. Non nude chat commented on Feb 04

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2015/11/02/a-very-big-month/ […]