Equities slid in October as the 2024 presidential election drew near. The S&P 500 fell 0.9%, the Nasdaq Composite slipped 0.5%, and the Dow Jones Industrial Average lost 1.3% in October. Semiconductor stock underperformance particularly weighed on markets; four of the ten worst performing S&P 500 stocks were companies in the semiconductors & semiconductor equipment industry, along with Super Micro Computer (SMCI). Ex-US indices logged worse performances this month; Emerging Markets sank 4.3% and Developed Markets tumbled 5.4%.

Eight of eleven sectors finished last month in the black; this month, it was the opposite. Only three sectors–Financials, Communication Services, and Energy–had a positive October. The worst-performing sector was Health Care, which lost 4.6% in October. Close behind was Consumer Staples (-3.5%) and Real Estate (-3.3%), the latter of which was affected by slowing home sales and prices along with spiking mortgage rates.

The Economy added just 12,000 jobs in October, the lowest monthly figure since December 2020. October saw several divergences among economic indicators: inflation fell while core inflation rose, the US ISM Manufacturing PMI declined as the Services PMI jumped higher, and mortgage rates spiked significantly even as Fed watchers expect the Fed Funds Rate to be cut by 25 basis points at the next FOMC meeting on November 7th, according to CME FedWatch.

Treasury yields shot higher in the middle and longer portion of the curve even as future Fed rate cuts are expected as early as the November 7th FOMC meeting. The 3-year and 5-year Treasury Note yields rose the most of any durations on the curve, gaining 54 and 57 basis points, respectively. Yields on the 1-month and 3-month Treasury Bills declined in October.

Several bond funds took a hit as a result of the increasing yields. The iShares 20+ Year Treasury Bond ETF (TLT) fell 5.5% in October, and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD) lost 3.2%. Declines in the 1-month and 3-month T-Bill yields helped move the short-duration SPDR® Bloomberg 1-3 Month T-Bill ETF (BIL) higher by 0.4%.

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