October: Could markets hit bottom?

This October is an eerie month for investors in markets across the world as they embrace increased volatility, uncertainty regarding U.S. monetary policy, and increasing signs of weakness in economic growth across Europe and China.

October has historically been considered to be turnaround month, with markets rebounding after a period of weakness.

However, it’s possible for that weakness to linger on. This October, in particular, will dictate how stocks will perform for the rest of the year.

There are a series of major events occurring this month, the outlook of which could end up changing investor sentiment significantly.

During the first week of the month the European Central Bank will be meeting and talking about their asset-backed purchase program – at a time when the US Fed is pulling out of a similar bond purchasing program.

September employment will be released too which, if promising, could make the Fed more hawkish in its policy decisions. The Fed is stepping away from quantitative easing at the end of the month and traders are aware that positive US economic data could drive the Fed to increase rates sooner than expected.

If the month is welcomed with positive data from Europe and Asia, then markets will rebound. However, if signs of the economic slump continue to be reported in the regions, then markets may suffer more than they have over the past few months.

In terms of US growth, JP Morgan chief economist Bruce Kasman, told CNBC:

“We’re turning to the fourth quarter, which is an important quarter as to how its playing itself out…The issue now is do we sustain the momentum. We’ve had a good run and I think it’s impressive how the U.S. has held up through the late summer,”

I’m concerned with the fact that we’ve had three times in this expansion growth pick up for a couple of quarters, and each time it’s turned back over,” he said. “We want to see if something new is kicking in here, as we go into the fourth quarter.”

Major events that you should watch out for in October:

• October 2^nd – ECB meeting
• October 3^rd – U.S. employment report for September
• October 5^th – Brazilian general elections
• October 8^th – FOMC minutes from September meeting
• October 8^th – U.S. Q3 corporate earnings
• October 10-12^th – IMF meeting in Washington
• October 15^th – U.S. retail sales data
• October 20^th – China Q3 GDP, retail sales, industrial production
• October 22^nd – U.S. CPI
• October 29^th – Fed monetary policy decision
• October 30^th – Q3 GDP in the US
• October 31^st – U.S. personal income/spending and Q3 Employment cost index