October Shows Signs of Economic Strength

October provided equity investors with the best month in nearly 20 years. In percentage terms, the Dow Jones Industrial Average (DJIA) gained 9.54%, NASDAQ rose 11.14% and the S&P 500 closed up 10.77% from September¹. While November typically is the “sweet spot” for technical minded investors (the S&P 500 has advanced in 57% of Novembers since 1928 and is continuously the second-best month of the year since 1950), the unresolved situation in Europe continues to hang over the market.

While consumers remain pessimistic, they are still spending enough money to move the economy along. Confidence improved from 59.4 in September to 60.9 in October, but still remains low as reported by University of Michigan Consumer Sentiment Survey². Shopping malls and the factories showed signs of strength as evidenced by the retail sales and the manufacturing index data. U.S. auto sales also posted a 7.5% monthly gain in October³.

The most reassuring economic indicator was the U.S. 3^rd Quarter Gross Domestic Product (GDP). GDP refers to the value of all goods and services provided, and is the primary measurement used to track the health of a country’s economy. A 2.5% rise in the U.S. 3Q GDP is what the majority of economist had projected and puts to rest the arguments that we were on the verge of a double-dip recession⁴.

Globally things were looking much better as the Euro Zone nations worked toward a solution to avert a Greek default. The month ended with the Greek Prime Minister George Paparandou throwing a political curveball to the European Union, declaring his intent only to make the necessary deficit-cuts contingent on a public vote.

Overall, October was a very positive month for investors. Looking forward in the short term, we remain cautiously optimistic as the Euro Zone nations work to re-establish stability.

1. Online.wsj.com, bigcharts.com [10/31/11]
2. www.npr.org.blogs/thetwo-way/2011/10/25/191683694/consumer-connfidence-back-down-to-recession-level [10/25/11]
3. www.ism.ws/ISMReport/MfgRob.cfm [11/1/11]
4. abcbnews.go.com/Business/gdp-grew-25-percent-boosted-consumer-spending-double/story?id=14821833[10/27/11]

Disclosure

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any company names noted herein are for educational purposes only.

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.

Investing in securities in emerging markets involves special risks due to specific factors such as increased volatility, currency fluctuations and differences in auditing and other financial standards. Securities in emerging markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.

An index is a statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value. An investment cannot be made directly into an index.

Investing in fixed income securities involves credit and interest rate risk. When interest rates rise, bond prices generally fall. Investing in commodities may involve greater volatility and is not suitable for all investors. Investing in a non-diversified fund that concentrates holdings into fewer securities or industries involves greater risk than investing in a more diversified fund. The equity securities of small companies may not be traded as often as equity securities of large companies so they may be difficult or impossible to sell. Neither diversification nor asset allocation assure a profit or protect against a loss in declining markets. Past performance is not an indicator of future results.

Financial Planning offered through Reason Financial, a state Registered Investment Advisor. Investment advice offered through Merit Financial Group, LLC an SEC Registered Investment Advisor. Merit Financial Group and Reason Financial are separate entities. Tax related services offered through Reason Tax Group. Reason Tax Group is a separate legal entity and not affiliated with Merit Financial Group, LLC. Sean P. Storck CA Insurance Lic#OF25995 and Steven W. Pollock CA Insurance Lic#OE98073

October Shows Signs of Economic Strength

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