The S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices closed the month down -16.83%, -13.95% and -16.30%, respectively. Year-to-date, that leaves these indices -34.03%, -29.61% and -35.98% below their respective 2007 closes -- loss levels only seen in a handful of years since the advent of the US exchanges [Link].
News flow for the period focused on exploding credit spreads and other systemic worries, the outcome of the Lehman Brothers and Washington Mutual Credit Default Swaps, globally coordinated stabilization efforts -- locally featuring the passage and implementation of the TARP program and two separate 50 basis point rate cuts, several large merger and layoff announcements, and dour economic reports including the worst GDP and unemployment levels seen post 9/11 2001. Earnings season also went into full tilt, with mixed third-quarter performances reported, but universally cloudy outlooks.
In a more positive light, credit markets gradually responded to the various government efforts, energy prices halved their summer peaks, and the final week saw a powerful reversal to the upside on rebalancing even in the face of recessionary economic readings. In fact, that last week performance was reportedly the best showing since 1974, highlighting the extremes of a month characterized by record breaking volatility.
The only remarkable fact regarding Style-Box and Sector performances was that nothing was spared save the US Dollar, as Treasuries benefited from a flight to safety during the global rout.
As we head into the traditionally strong time of year for equities, the rescue efforts continue to take effect, and US national elections come to pass, it remains to be seen how markets will respond to on going confirmation of a bona fide worldwide recession.
Volatility: Historic (VIX 39-80)
The Style-Box was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV). The Sector-Ribbon was calculated using the following Select Sector SPDR™ ETFs: Materials (XLB), Industrials (XLI), Energy (XLE), Staples (XLP), Discretionary (XLY), Financials (XLF), Technology (XLK), and Healthcare (XLV). The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.