October 2024 Index Market Overview: Key Insights and Trends

The global index market in October 2024 is experiencing notable developments, driven by economic data, corporate earnings, and political uncertainties. Investors are paying close attention to the impacts of U.S. economic strength, inflation expectations, and the upcoming U.S. Presidential Election. 

U.S. Equity Market Reaches New Highs

The U.S. equity market continues its upward trend, with the S&P500 and Nasdaq reaching record highs. The S&P500 touched 5,796.8 points on October 9th, driven by optimism surrounding corporate earnings and expectations of further monetary easing by the Federal Reserve. The Nasdaq rose by 7.5% month-over-month (MoM), while the S&P500 gained 5.2% MoM​.

Despite this growth, the market faces potential headwinds. The rising VIX index, a measure of market volatility, suggests that investors are purchasing options to protect against downside risks ahead of the U.S. Presidential Election on November 5th. This reflects growing concerns about market stability in the face of political uncertainty​.

Federal Reserve Policy and Inflation Outlook

Monetary policy remains a crucial factor for the index market. The Federal Reserve’s recent decision to cut rates by 50 basis points (bp) in September has bolstered investor confidence. Chairman Jerome Powell indicated that inflation is moving closer to the 2% target, and economic risks are balanced. This "recalibration" of policy aims to support a soft landing for the U.S. economy, maintaining employment growth while gradually reducing inflation​.

U.S. inflationary pressures have already eased, with core inflation slowing to 2.7% year-over-year (YoY) in August, down from earlier peaks. Lower inflation expectations are fostering optimism for further rate cuts, which could continue supporting stock valuations in the months ahead​.

Earnings Season: Mixed Signals for Investors

October is a critical month for corporate earnings reports, with major companies like Apple, Tesla, and Alphabet releasing their financial results. Earnings growth has been a key driver of the market’s performance, but there are signs of vulnerability, especially for companies in the Nasdaq 100 index. While forward earnings projections for the S&P500 remain solid, any disappointing earnings or guidance could lead to sharp corrections due to high current valuations​.

Tesla’s inventory levels and Apple’s iPhone 16 sales will be closely watched, while Alphabet faces legal challenges that could weigh on its stock performance. Investors are also wary of the potential for earnings downgrades, particularly in sectors that have seen stretched valuations​.

European Markets: Weakness in the DAX and FTSE100

While U.S. indices showed strong performance, European markets presented a more mixed picture. The DAX gained 5.3% MoM, buoyed by strong performances from companies like Zalando and Siemens Energy. However, the index remains under pressure from a weakening Euro Area economy. Economic sentiment in the region has deteriorated sharply, which could cap further gains in the DAX​.

The FTSE100 was relatively flat, rising only 0.3% MoM. Despite an 8% increase in the index over the past year, earnings growth has been negative, with earnings per share down 8.8% YoY. Analysts expect a fragile recovery, but concerns over falling earnings and a rising price-to-earnings ratio suggest limited upside potential​.

Looking Ahead: Political and Economic Uncertainties

As the U.S. Presidential Election approaches, investors are bracing for potential volatility. Polls suggest a tight race, with both political outcomes likely to impact market sentiment. The Federal Reserve’s next moves, combined with the outcome of the election, will be key drivers of market direction in the coming months.

In conclusion, the index market in October 2024 is shaped by optimism over earnings and monetary policy but faces significant risks from political uncertainty and stretched valuations. Investors should remain vigilant, particularly as key events unfold in November.