Increased volatility in US stocks in October? Strategist: Maintain a moderate optimistic attitude and bullish on the utility sector

According to the Wisdom Financial APP, September is usually the worst-performing month in the history of the U.S. stock market. However, due to the significant rate cuts by the Federal Reserve and stimulus policies in China, the U.S. stock market surged to near historic highs in September this year.

As we enter October, this is typically a strong month for the stock market, but it is also known for its volatility and occasional market crashes. Although the stock market did not experience a significant decline this Tuesday, Wall Street's welcome to the start of October was not particularly pleasant.

On Tuesday, the U.S. stock market rebounded from the day's lows, but the Dow Jones Industrial Average still fell by nearly 175 points, a decline of about 0.4%, as investors worried that the Federal Reserve might not cut rates as significantly as initially expected. Federal Reserve Chairman Powell's speech on Monday seemed to suggest a more gradual approach to rate cuts. The S&P 500 index fell by over 0.9%, while the tech-heavy NASDAQ Composite Index and the small-cap Russell 2000 Index each fell by about 1.5%.

Interest rates are not the only focus of investors. Tensions in the Middle East have also put pressure on market sentiment, with Iran previously launching missiles at Tel Aviv. Escalation of hostilities could push up oil prices. The U.S. port strikes are also a concern, as supply chain disruptions caused by dockworker strikes could once again raise inflation concerns.

The Chicago Board Options Exchange Volatility Index (VIX), also known as Wall Street's "fear index," briefly soared by over 20% on Tuesday before falling back to around 19 after the Israeli attack, an increase of 15%.

Investors need to stay calm

Jeff Mills, Chief Investment Strategist at Bessemer Trust, said, "There are many factors that make me moderately optimistic about the stock market." He pointed out that the deflationary trend in the U.S., China's new stimulus policies, and the global trend of interest rate cuts should outweigh geopolitical concerns.

In addition, the third-quarter and future corporate earnings expectations are mostly positive, which is another reason to remain bullish. According to FactSet Research data, analysts expect earnings for the S&P 500 index to grow by nearly 5% in the third quarter, with profit growth accelerating to almost 15% in the fourth quarter and the first quarter of 2025.

Mills believes that at the current levels, healthcare and industrial stocks look attractive, and he expects the market rebound to further expand.

Jeff McClean, Managing Partner at Solidarity Capital, also believes that the "other 493 stocks" outside the top seven in the S&P 500 index will continue to catch up. He is particularly bullish on the utilities sector and recommends investors to buy the Utilities Select Sector SPDR exchange-traded fund (ETF) instead of trying to pick individual stocks.

McClean also noted that if there is an improvement in global energy demand and geopolitical turmoil leads to an increase in oil prices, oil service stocks will be another sector to benefit. He believes that there may be consolidation in the industry. McClean's company holds the VanEck Oil Services ETF However, Mills stated that investors should not give up on the "Big Seven". He said, "It is difficult to be negative on tech stocks because their fundamentals are still strong. Although there may be a revaluation of valuations, the tech sector still has support and more room for growth. They remain strong as they enter 2025."

McClean also has no intention of giving up on tech stocks. He holds Alphabet (GOOG.US, GOOGL.US) and believes that the company's stock price has been overly suppressed due to regulatory concerns.

Investors should also not overreact to Powell's slightly hawkish comments on interest rates.

Anthony Denier, President and CEO of Webull, said, "Concerns about inflation, economic hard landing, and the feeling of Fed inaction should have dissipated when the Fed cut rates by 50 basis points."

Denier, in an interview, mentioned that despite recent market volatility, "the overall feeling of retail investors is calm." Looking back at August and early September, the market also experienced significant volatility before stabilizing. Therefore, investors may want to take advantage of any pullback opportunities to position themselves