Top ETF Stories of October 2023
After a downbeat September, October, too, remained depressed for Wall Street. The S&P 500 recorded its first three-month losing streak last month since March 2020. High oil and gas prices, still-high inflation, and the Fed’s policy tightening spree, along with the resultant rise in bond yields, kept the market subdued. The S&P 500 fell 2.2% in October.
The U.S. benchmark treasury yield started the month at 4.69%, reached a high of 4.98% on Oct 19 and stood at 4.88% on Oct 31. Apart from higher rates, there was heightened geopolitical crisis due to the occurrence of war between Israel and the Gaza-based militant group Hamas. This has sent oil prices higher.
Against this backdrop, let’s take a look at the key happenings in the ETF world in October.
Israel-Gaza War
Israel declared war against Gaza after Gaza militants' surprise attack on Israel in early October. The move impacted a few asset classes as safe-havens like gold gained. Gold bullion ETF SPDR Gold Trust GLD jumped about 9% in the past month (as of Oct 30, 2023) despite higher U.S. interest rates.Shares of defense companies surged amid the conflict between Israel and Gaza. iShares U.S. Aerospace & Defense ETF ITA added 2.8% in the past month (as of Oct 30, 2023) (read: Defense ETFs Spike on Middle East Tensions).
Release of Upbeat U.S. GDP Data
The United States witnessed substantial economic growth in the third quarter of 2023, with the real gross domestic product (GDP) rising at an annual rate of 4.9%, beating economists’ expectations of 4.7%. Consumer spending was one of the main contributors to U.S. GDP growth. The GDP increase marked the largest gain since the fourth quarter of 2021.
Consumer spending, as measured by personal consumption expenditures, improved 4% in the quarter after rising just 0.8% in Q2, and was responsible for 2.7 percentage points of the total GDP increase. Consumer Discretionary Select Sector SPDR ETF XLY, Zacks ETF Rank #1 (Strong Buy), should thus be closely watched (read: Consumer Spending Boosts U.S. Q3 GDP: ETFs to Buy).
Surge in Treasury Bond Yields
Thanks to the upbeat economic data points like jobs report, retail sales data, manufacturing data and third-quarter GDP data, U.S. treasury bond yields surged in October. Since inflation remains sticky, such upbeat economic data will help the Fed to keep rates higher for longer. iShares 20+ Year Treasury Bond ETF TLT lost about 4.5% in the past month due to higher yields.
Earnings Season Underway: Results Optimistic
The earnings season is underway. For Q3 of 2023 as a whole, the S&P 500 earnings growth expectation is currently 1.2% from the same period last year on 1.2% higher revenues. This would follow the 7.1% decline on 1.1% higher revenues in Q2, per the Earnings Trends. Please note that earnings growth has turned positive for the first time after staying in negative territory for three back-to-back quarters.
End of UAW Auto Strike
In a significant development in the ongoing American automotive industry labor dispute, General Motors GM has reportedly reached a tentative agreement with United Auto Workers (“UAW”). This marks a significant step toward ending a contentious labor issue that has plagued the industry for over six weeks.
While specific details of the agreement have not been disclosed, it is believed to closely mirror the agreements reached by GM's competitors, Ford F and Stellantis. First Trust NASDAQ Transportation ETF FTXR may be watched closely, going forward, due to end of the labor strike in the auto sector (read: Auto ETF in Focus as Ford & UAW Reach Tentative Labor Deal).
Cryptocurrency Rule
Bitcoin, the world's largest cryptocurrency, rose about 27% in October and even touched nearly $30,000 mid-month, triggered by false information regarding the approval of a spot ETF by BlackRock Inc. A false rumor circulated by Cointelegraph on the social media platform X (formerly Twitter) resulted in nearly $100 million in liquidations in just one hour.
However, the spike was temporary as BlackRock clarified that its ETF application is still under review. Though the report was false, it underscores investors’ hope of SEC approval for a spot bitcoin ETF. According to Bloomberg analysts, there is a 90% chance that a spot bitcoin ETF will get approval by January. No wonder, First Trust SkyBridge Crypto Ind and Digi Econ ETF CRPT added 7.5% past month (read: Cryptocurrency Ether ETFs: Will October be a Pivotal Month?).
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iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports
General Motors Company (GM) : Free Stock Analysis Report
SPDR Gold Shares (GLD): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports
First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT): ETF Research Reports
