With debt default averted for now and the government reopened, the S&P 500 continued its winning ways in October. The broad market index rose 4.46% for the month, bringing YTD returns to 25.3%. S&P Mid Cap stocks gained 3.64%, finishing up 26.34% YTD. S&P Small Cap stocks rose 3.54%, driving their YTD returns to 32.04%.
International Developed markets (MSCI EAFE Index) added 3.36%, increasing YTD returns to 20%. Emerging markets (MSCI Emerging Markets Index) gained 4.86%. The October gains helped total returns for the Emerging market move back into positive territory YTD.
Interest rates decreased. The 10-year U.S. Treasury closed at 2.55% compared to 2.61% in August. The 30-year U.S. Treasury closed at 3.63%. Gold closed at $1,323.50. Commodities continued their decline. Both the Dow Jones-UBS Commodity and S&P GSCI are in negative territory YTD.
The S&P National AMT-Free Municipal Bond Index finished the month up 0.92%. YTD, this index is down 2.06%, representing the culmination of news within the past few months regarding Detroit, Puerto Rico and the arbitration results for those states that have issued tobacco settlement bonds.
Investment-grade corporate bonds recorded a 1.31% return for October, chipping away at the -1.14% YTD return, as tracked by the S&P U.S. Investment Grade Corporate Bond Index.
Notably, the S&P U.S. TIPS Index was up 0.59% month-to-date, as the U.S. Treasury auctioned off $7 billion in 30-year notes. Though inflation remains low, the longer the Fed continues its stimulus, the greater the chances are that inflation will eventually begin to rise.
With interest rates at historic lows some investors may consider high yield stock funds as a bond alternative. What are the costs of investing only in firms that pay dividends? Does diversification suffer? How predictable are dividend payments? Please click here for John Gorlow’s perspective: