Market Commentary — October 31, 2022
Last week was a tale of two markets, with gains for the DJIA putting it on track for its best October ever with its fourth positive week in a row, while mega-cap tech names took a beating reminiscent of the dot-com bust of the early 2000s. Ultimately, the S&P 500 and NASDAQ also ended the week higher, up 3.9% and 2.2% respectively.
For mega-cap tech names like Meta, Amazon, and Alphabet, disappointing earnings were to blame for the drag on performance. Meanwhile, much of the rest of the market rallied on hopes that the Fed and other major global central banks are nearing the end of their tightening cycle as inflation abates.
Worries that aggressive Fed rate hikes and the consequent steep rise in the U.S. dollar might spark instability in the global financial system have led to speculation that the Fed might soon dial back its aggressive pace of rate hikes or even pause them. Stoking further optimism, on Wednesday, the Bank of Canada unexpectedly raised rates by 50 bps instead of the 75 bps anticipated.
While the focus has been on the Fed, midterm elections are also coming up, which is typically bullish for stocks. Oxford Economics data shows that the S&P 500 since 1950 has risen an average of 15% in the 12-month period following the midterm vote, with the rally typically starting a few weeks prior to the election. Seasonal trends are also in the market’s favor. November and December rank as the second- and third-best performing months of the year since 1950, with average S&P 500 gains of 1.7% and 1.5%, according to the Stock Trader’s Almanac.
In ETF news, according to the FT, crypto ETFs account for 5 of the worst 7 debuts in ETF history, launched at the end of 2021 near crypto’s last peak. The much-hyped ProShares Bitcoin Strategy ETF (BITO) is down 69.6% since its eagerly awaited debut last October 19, 2021. Likewise, the US-listed Global X Blockchain ETF (BKCH), which entered the fray on July 14th last year, has plummeted 73.3% in its first year of operation. Invesco Alerian Galaxy Crypto Economy ETF (SATO), another October 7, 2021 launch, was not far behind, sinking 73.7%, while the First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT), launched September 21, 2021, has lost 68.4% inception to date.
By comparison, the actively managed BLOK ETF, which has been around since 2018 and has weathered crypto winters before, is down 50% since 9/30/21. You can listen to BLOK’s Portfolio Manager Mike Venuto’s thoughts on Blockchain, along with my presentation for the investment case for our new Natural Resources Dividend Income Index in the webinar below.
Happy Halloween everyone and here’s to a continued bull run into the end of the year!
CEO and Co-Founder