For the month of October, the S&P 500 returned -2.10% and a 60/40 blended portfolio -1.95%. Year-to-date, the S&P is up +10.69% and a 60/40 blend up +4.38%.
October saw global markets grapple with geopolitical worries for the first time since Russia invaded Ukraine. The Hamas attack and Israeli retaliation in the Middle East found markets eventually down about -6% and the VIX up about 6.5 points. At the same time, October saw 16-year highs at 5% in the US 10-year note, further bringing into question whether the equity risk premium is “worth it” given higher rates of return in bonds.
The VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
Curiously there was not a sell-off in October and investors were not rattled as sharply as past events. Compare the VIX rising 20+ points in February 2018 when the market went down -6%, and you can see this was a bit of a volatility-less sell-off in October. What's more, the market rallied back off its lows and volatility subsided some in the final days of the month.
Heading into November, the market has moved from the falling market/rising volatility to falling market/rising volatility quadrant. The question is how to participate in market rebounds while defending from sharp sell-offs.
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