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Investors Likely to be Cautious in October

4 October 2010 - News - Editor

Despite the fact that US stock markets enjoyed the best September in decades, ending the month on an upbeat note, analysts are cautioning against getting too optimistic as the final quarter of 2010 gets underway. September's success is attributed mainly to actual economic readings being higher than forecasts. However, investors need to bear in mind that economic forecasts were somewhat pessimistic following dismal market performance in August amidst fears of a double-dip in the economy. So, while September’s economic readings were better than expected, they were by no means great.

From a political point of view, October is the run-up month to mid-term elections to be held on November 2, during which 37 of the 100 seats in the United States Senate will be contested. Running concurrently, the United States House of Representatives elections affects all 435 seats of the 50 states as well as the delegates representing the District of Columbia (the D.C. in Washington D.C.) and four of the five major territories of the United States - Puerto Rico being excluded due to the Resident Commissioner of the island having been elected to a four-year term, expiring in 2012. Gubernatorial elections will affect 37 states and 2 U.S. territories. It is very likely that investors will be somewhat skittish during October, pending the outcome of the election of future policy-makers to office.

October brings with it the release of third quarter results by stock market listed companies, along with adjusted forecasts for the remainder of 2010. Other issues that will be closely monitored by investors include unemployment and job creation, factors which have a direct affect on the driving force of the economy – consumer spending. However, the job market was dealt a blow at the end of September when a government-subsidized job creation initiative known as the Temporary Assistance for Needy Families program (TANF) came to an end, putting tens of thousands of Americans out of work. While roughly half the jobs created went to young people as summer employment, with these youths going back to school, the other half was aimed at adults, who will now join the ranks of the unemployed – and with the unemployment rate at just under ten percent, many believe that this is genuine cause for concern as economic recovery battles to gain momentum.

 


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