market attributes: u.s. equities october 2019 · market attributes u.s. equities october 2019 key...

Market Attributes

U.S. Equities October 2019 KEY HIGHLIGHTS

• The S&P 500® was up 2.04% in October, bringing its YTD return to 21.17%.

• The Dow Jones Industrial Average® gained 0.48% for the month and rose 15.94% YTD.

• The S&P MidCap 400® increased 1.03% for the month and was up 17.58% YTD.

• The S&P SmallCap 600® returned 1.86% in October and 14.25% YTD.

Exhibit 1: Index Returns

INDEX 1-MONTH (%) 3-MONTH (%) YTD (%) 1-YEAR (%)

S&P 500 2.04 1.92 21.17 12.02

Dow Jones Industrial Average 0.48 0.68 15.94 7.69

S&P MidCap 400 1.03 -0.58 17.58 7.14

S&P SmallCap 600 1.86 0.20 14.25 1.62

Source: S&P Dow Jones Indices LLC. Data as of Oct. 31, 2019. Past performance is no guarantee of future results. Table is provided for illustrative purposes. Returns shown are price returns.

MARKET SNAPSHOT

And the band played on—“that's the way, uh-huh uh-huh, I like it, uh-huh uh-huh.” While I don’t

particularly like that song, it sure sounded nice playing on the Street this month, as the S&P 500 posted

its 14th and 15th new closing highs of the year (105 since the U.S. November 2016 election). It was a

month of global politics, but the Street focused on earnings reports, with a little help from phase 1 of the

U.S.-China trade agreement, the U.S. FOMC’s third rate cut in a row, the Brexit three-month extension,

and a lack of recessionary evidence. The market voted on the floor with its trades, which made the

index (and its investors) a winner. The S&P 500’s YTD return was up 21.17% for October (23.16% with

dividends), with some background talk of November position close outs (even the greedy take a

vacation), or close outs leaving a little money in short-term instruments on the table—just in case. For

now, all seem optimistic, and end-of-month trading was unusually slow, as volatility was low (the

second half high/low spread was 8.1%, compared to the first half’s 21.3%, with 2018 at 25.3%); but

here we are again—at (or near) another all-time high.

The S&P 500 increased 2.04% in October (2.17% with dividends). For the three-month period, the

index was up 1.92% (2.43%), and the YTD gain was 21.17% (23.16%), the best 10-month YTD

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Contributor:

Howard Silverblatt, Senior Index Analyst, Product Management, [email protected]

S&P Dow Jones Indices’ Market Attributes® series provides market commentary highlighting developments across various asset classes.

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U.S. Equities October 2019

MARKET ATTRIBUTES 2

opening since 2013's 23.16% (2013 ended with a 29.60%). The bull market run (from March 9, 2009)

was up 349% (15.15% annualized) and up 461% (17.58%) with dividends.

Q3 2019 earnings, which declined 9.6% YTD, are beating the new lowered estimates (just as Q2

2018's 7.1% lowered EPS did) with a 75.2% beat rate (historical was 67%), as sales are posting a

60.5% beat rate. The estimate for Q3 declined 1.9% since the start of the quarter and 9.6% from year-

end 2018; it is currently expected to post a 0.3% decline over Q2 2019 and be 3.3% lower than the

record Q3 2018 level. Q4 optimism continues, despite its estimate being reduced 2.8% from

September 2019 and 9.4% from year-end 2018, and it is forecasting a happy holiday increase of 2.5%

over Q3 2019, setting a new quarterly record (but it would still be shy of the record Q3 2019 result).

The forecast for 2019 is 5.0% over 2018, with the 2020 election year dream being 11.5%. Share count

impact to date continues, as 24.7% of the reported issues had at least a 4% tailwind due to lower share

counts (i.e., flat earnings in aggregate compared to a 4% rise on an EPS basis), compared to Q2

2019’s 21.2% and Q3 2018’s 17.7%; the most recent high was 28.2% in Q1 2016.

With 59.3% of the Q3 2019 buybacks reported, the total is running 3.5% higher than the same issues

for Q2 2019 and 4.3% lower than the same issues for Q3 2018, potentially coming in at the USD 171

billion level. The hope is for a USD 170 billion level, which should be enough to support stocks (buying)

and still permit share count reduction, which increases EPS. To date, 24.7% of the reported issues

have at least one 4% year-over-year EPS increase due to share count reduction (Q2 2019 was 24.2%

and Q3 2018 was 17.7%). With 59.4% of capital expenditures for Q3 2019 reported, the total was 2.0%

higher than Q2 2019 and 2.6% higher than Q3 2018 for the same issues.

Cash dividends for Q3 2019 set a record (USD 14.80 per share; USD 123.2 billion), and based on the

paid and declared rates, it is on the path to set another record for Q4 2019, as well as for 2019. Bitcoin

closed at USD 9,229, up from last month's USD 8,265 (USD 8,534 the month before that), trading as

high as USD 10,022 and as low as USD 7,447 (USD 3,747 at year-end 2018, USD 13,850 at year-end

2017, and USD 968 at year-end 2016). The S&P 500 target price was 3,316 (9.2% from here; 3,305

last month), and The Dow target price was 29,380 (8.6% from here; 29,715 last month).

The House of Representatives launched an impeachment inquiry into the events surrounding Trump’s

telephone conversation with Ukraine President Zelensky to determine if they should proceed with

impeachment against President Trump; if so, a vote goes to the full House, with a majority needed to

impeach, and if passed, it goes to the full Senate, where a two-thirds vote is required to remove Trump

from office. In response, Trump called the proceedings “bullshit,” as he urged China and Ukraine to

investigate Biden (former U.S. Vice President under Obama, and the leading Democratic Party

contender to run against Trump in the 2020 presidential election). The House called witnesses in the

process, as the White House blocked some, to which the House issued subpoenas (expected to end up

in the courts). On the last day on the month, the House set the formal public process for impeachment

(the prior inquiry was behind closed doors), with witnesses to be questioned by members (of both

parties), and no time limit.

The World Trade Organization said the U.S. could impose tariffs on USD 7.5 billion of European

exports (annually) to counter illegal government aid to Airbus (EADSY). The Trump administration then

implemented new tariffs of 10%-25% (including single-malt scotch—don’t mess with Macallan). The

U.S. and China came to an agreement referred to as an understanding for “phase one,” with planned

U.S. tariffs on China being postponed, as an official agreement was being written (with some signs that

negotiations continued). Behind-the-scenes negotiations continued on completing a U.S.-China phase


MARKET ATTRIBUTES 3

1 agreement, with the goal of signing it at the Asia-Pacific Economic Cooperation meeting in on Nov.

16-17, 2019, in Santiago, Chile (at which both Trump and Xi Jinping were scheduled to attend).

However, Chile then cancelled the upcoming summit meeting, citing local unrest over issues of

inequality. Turkey sent troops into northern Syria to engage with their Kurdish adversaries after Trump

removed U.S. troops from the area. Trump then imposed steel tariffs on Turkish exports to the U.S., as

he sought, and got, a cease-fire in the area.

The FOMC minutes from the Sept. 17-18, 2019, meeting showed a sizable hawk who did not see the

need for easing, as the majority still appeared to be in the dovish camp, leaving the market to continue

its expectations for another interest rate cut at the Oct. 29-30, 2019, meeting (with the final one this

year on Dec. 10-11, 2019). The minutes also showed continued concern over the risk due to trade

policies. Fed Chair Powell said the Fed would purchase more short-term Treasury issues to avoid a

repeat of the recent liquid strains, as he said it was not a return to QE. The Fed Beige Book pointed to

a slowing economy, as growth was expected at “a slight to modest pace.” In his last meeting as the

ECB president (former IMF Chair Christine Lagarde will take over for a non-renewable eight-year term),

Mario Draghi held rates unchanged. The FOMC, as expected, cut interest rates by 0.25% (8-2 vote) for

the third time this year (it raised 10 times from 2011 through 2018; 12 decreases from 2007 through

2008). Its policy statement outlined a higher bar for additional reductions, as it removed the phrase “act

as appropriate” to sustain the economic expansion from the statement. The equity market reaction was

muted at first, as bond yields ticked down slightly, then equities moved higher to close the day at a new

closing high. Related, the Hong Kong Monetary Authority reduced its interest rate by 0.25%, since they

are pegged to the U.S.

Swedish Riksbank met and maintained its -0.25% interest rate, as it said it would end its five years of

negative rates at its December 2019 meeting. The Ukrainian central bank cut its rate for the fourth time

this year, to 15.5% from the previous 16.5%, as Turkey reduced its rate by 2.50% to 14.0% (as inflation

declined), with Norway keeping its rates unchanged. The Bank of Japan met, leaving its interest rates

unchanged and hinting that lower rates were possible.

The brokerage war continued, as E*Trade (ETFC) joined Charles Schwab (SCHW), Interactive Brokers

(IBKR), and TD Ameritrade (AMTD) in eliminating commission fees on certain online stocks, ETFs, and

options. The hope was to win business as they absorb the cost of online trades, which the Street did

not fully buy into, resulting in substantial declines (some joked that they are waiting for the equivalent of

negative rates—you pay me to trade with you). Later in the month, Schwab said it will permit investors

to buy and sell fractions of shares.

Discount department store Walmart (WMT) will start several healthcare pilot programs in the U.S. to cut

healthcare costs in 2020; other large companies (Amazon) have made public comments on their

intentions to do so as well. General Motors (GM) and the 47,000 United Auto Workers (UAW) on strike

since Sept. 16, 2019, came to an agreement, as the strike was estimated to cost the company USD 3

billion (and workers over a month’s pay). Soon after the approval, the UAW came to a similar

agreement with Ford (F). Industrial issue General Electric (GE) said it would freeze the pensions of

20,000 employees (in a cost-saving move), as it moves them to a 401(k)-based savings and retirement

program. Mailing system Stamps.com (STMP) announced a business arrangement with UPS (UPS),

offering customers discounts (Stamps discontinued its arrangement with the U.S. Postal Service in

February 2019). Aircraft issue Boeing (BA) said it still expected its 737 Max to return to service this

year, as the company cut the plane’s production for 2020. Communication Services issue AT&T (T)


MARKET ATTRIBUTES 4

came to a “truce” with its activist investor Elliott Management, as it said it would restrain itself from any

larger new takeovers (Elliott had objected to the recent ones of Time Warner and DirectTV), as it

focuses on improving its profitability. S&P DJI added resort operator Las Vegas Sands (LVS) to the

S&P 500, as it removes Nektar Therapeutics (NKTR), which was added to the S&P MidCap 400.

After cancelling its IPO (and letting some workers go), work sharing space issue We Company (owner

of WeWorks) encountered liquidity issues, as SoftBank (SFTBY), which had owned a third of the

company, negotiated a USD 9.5 billion plan that included them taking control of the company and

adding funds, valuing the company at USD 8 billion—it had been valued at USD 47 billion. Reports

said Saudi Arabia was expected to launch its Aramco (ARMCO) IPO offering on Dec. 11, 2019, on the

Saudi exchange. Brewer Anheuser-Busch InBev (BUD) launched its spin off Hong Kong business,

Budweiser Brewing APAC.

In a globally watched case, an EU court said the EU can require social media issue Facebook (FB) to

remove posts, photographs, and videos. California Utilities issue PG&E (PCG) shut off electricity for

738,000 households (estimated to be up to 2 million people) in an effort to prevent power line sparks

from causing fires. The stock declined 38.4% for the month (to USD 6.16) and was down 86.8% over

the one-year period (October 2018, USD 46.81).

The pound traded above 1.30, and it closed at 1.2928 from 1.2291 last month (1.2754 for year-end

2018, 1.3498 for 2017, and 1.2345 for 2016); the euro was up to 1.1154 from last month’s 1.0900

(1.1461, 1.2000, 1.0520); the yen closed at 108.02 from last month’s 108.05 (109.58, 112.68, 117.00),

and the yuan closed at 7.0387, down from last month’s 7.1485 (6.8785, 6.5030, 6.9448). Oil closed at

USD 54.14, down from last month’s USD 54.31 (USD 45.81 at year-end 2018, USD 60.09 for 2017,

and USD 53.89 for 2016). U.S. gasoline pump prices (EIA, all grades) decreased, closing the month at

USD 2.692 from last month’s USD 2.737 per gallon (USD 2.358, USD 2.589, USD 2.364). Gold was

up, closing at USD 1,515.40 from last month’s USD 1,480.50 (USD 1,284.70 for year-end 2018, USD

1,305.00 for year-end 2017, and USD 1,152.00 for year-end 2016). VIX closed at 13.22, trading as

high as 21.46 and as low as 12.27, down from 16.24 last month (16.12 at year-end 2018, 11.05 at year-

end 2017, and 14.04 at year-end 2016).


MARKET ATTRIBUTES 5

INDEX REVIEW

S&P 500

The S&P 500 closed at 3,037.56 for October, up 2.04% (2.17% with dividends) from last month's

2,976.74 close, when it was up 1.72% (1.87%). Year-to-date, the S&P 500 was up 21.17% (23.16%

with dividends). For the three-month period, the S&P 500 was up 1.92% (2.43% with dividends), as its

YTD return was up 21.17% (23.16%), and the one-year period was up 12.02% (14.33% with dividends).

The Dow closed at 27.071.40, up 0.57% (0.84% with dividends) from last month's 27,046.23, when it

was up 0.48% (0.59%). For the three-month period, The Dow posted a 0.68% gain (1.29% with

dividends), its YTD return was up 15.94% (18.19%), and the one-year return was 7.69% (10.32%).

Intraday volatility (daily high/low) increased to 0.86% from last month’s 0.79% (1.43% the month before

that), as the YTD level was 0.91% (0.92% last month); 2018 was 1.21% and 2017 was 0.51% (which

was the low since 1962, with the average at 1.43%). S&P 500 trading decreased 10% (adjusted for

trading days) over the past month, after the prior month’s 2% increase; year-over-year trading volume

was 16% lower than the same period last year. One-percent moves decreased, as 2 days closed up at

least 1%, with 3 down, compared with 2 days last month (2 up and 0 down) for the 23 trading days (20

last month); year-to-date, 37 of 211 days posted moves of 1%, with 22 up and 15 down. Seven of the

23 days had a high/low intraday spread of at least 1%, compared with 4 of 20 last month (YTD 71 of

211, 2018 was 110 of 251).

Sector variance increased for the month, as 7 of the 11 sectors increased, down from last month, when

10 gained (3 increased the month before that). The spread between the best (Health Care, 5.00%,

which was the worst last month with -0.32%) and worst (Energy, -2.40%) sectors for the month was

7.40% (the one-year average was 9.18%), up from last month’s 5.13% (13.39% the month before that);

year-to-date, the spread was 34.20% (26.79% last month).

For the month, earnings ruled, and beating lowered expectations took trading priority over politics, as

risk was back on. Health Care did the best, rebounding 5.00% for the month and up 8.43% YTD, as it

remains a political topic for coverage and costs. Information Technology was next, as earnings beats

supported the sector. For the month, the sector gained 3.81% and was up 34.81% YTD and up

83.49% since the U.S. November 2016 election (both the best showings in the index). Communication

Services added 2.73% and was up 23.81% YTD. Energy did the worst, as oil prices declined. The

sector fell 2.40% for the month and was the worst-performing sector YTD, up 0.61%. Utilities and Real

Estate moved down, as risk beat out safety, falling 0.80% and off 0.16%, respectively (up 21.31% and

26.44% YTD, respectively). Consumer stocks underperformed, as Consumer Staples declined 0.33%

and was up 20.20% YTD, while Consumer Discretionary gained 0.29% and was up 21.56% YTD.

Breadth remained positive, but declined, as 290 issues gained, with an average gain of 5.54%, up from

last month’s 366 gainers (5.79% average) and the prior month’s 193 gainers. Gains of 10% or more

decreased (slightly) to 44 issues (with an average gain of 15.09% each) from last month’s 46 and from

the prior month’s 15; 4 issues gained at least 25% (2 did last month). On the down side, 214 issues fell

an average of 4.63% each, down from last month’s 139 decliners and from 312 the month before that.

Twenty-two issues fell at least 10% (-13.35%), up from last month’s 3 and 102 the month before; 1

declined at least 25% (2 did so last month). For the three-month period, 280 (281 last month) issues

were up, with 81 (86) of them up at least 10%, as 225 (224) were down, with 65 (78) of them down at

least 10%. Year-to-date, 419 issues were up (412 last month), with an average gain of 27.04%, as 357


MARKET ATTRIBUTES 6

(347) were up at least 10% and 197 (184) were up at least 25%, while 81 (87) were down an average

loss of 15.04%, with 46 (45) down at least 10% and 15 (17) down at least 25%.

The Dow

The good news is The Dow posted gains in the massacre month known as October—the bad news is

that it placed last among the headline indices (still, profit is always better than loss, unless you’re part of

a tax shelter). For the month, The Dow closed at 27,046.23, up 0.48% (0.59% with dividends) from last

month’s 26,916.83 close, when it was up 1.95% (2.05% with dividends), and the prior month’s

26,403.28 close, when it was down 1.72% (-1.32% with dividends). For the three-month period, the

index posted a 0.68% gain (1.29% with dividends), which was better than the mid- and small-cap

indices but trailed the S&P 500 (1.92%). Year-to-date, the gain was 15.94%, while the return for the

one-year period was 7.69%. Looking at longer-term periods, the two-year return was 15.69%, the

three-year period was up 49.08%, and the five-year gain was 55.52% (with the three- and five-year

periods beating the S&P 500).

For the month, 17 of the 30 issues gained, with an average gain of 5.12%, down from last month’s 23

(average gain of 4.62%) and up from August’s 11. On the downside, 13 issues declined (average loss

of 4.40%), up from 7 last month (19 the month before that). Two of the issues gained at least 10%

(average 13.68%), as two did last month, with two declining at least 10% (-11.26%), the same as last

month (two the month before that). For the three-month period, 18 issues were up, with an average

gain of 5.81%, up from last month’s 17 (average gain of 6.34%) and down from the 23 in the prior

month; 2 were up at least 10% (4 last month). On the down side, 12 issues declined (an average loss

of 6.76%), down from 13 last month, as 2 declined at least 10% (-14.00%), the same as the prior two

months. Year-to-date, breadth ticked up, as 25 of the 30 issues were up, an average gain of 20.54%,

up from 24 last month (and 23 the month before that). There were 17 issues that gained at least 10%,

up an average 27.20%, compared to 19 last month (18 the month before that), as 9 were up at least

25%, the same as last month (7). On the down side, 4 issues were down, an average of -11.56% each,

down from last month’s 5 (6), as 3 were down at least 10% (-15.1%; compared to 4 last month), as no

issue was down at least 25% (none last month).

Issue performance continued to vary and increased for the month, as earnings (and guidance) steered

the issues. The spread between the best and worst issue increased to 28.14%, from last month’s

18.90% (22.22% in August). The YTD spread continued to be significant and rose to 77.53% from last

month’s 61.04%, and the reason was the same—Apple (AAPL) was up 57.90% YTD, as Walgreens

Boots Alliance (WBA) was down 19.83% YTD. From the U.S. November 2016 election, Boeing was up

139.04% (then Microsoft gained 137.09% and Apple returned 123.99%), and Walgreens Boots Alliance

(WBA) was down 31.60% (Exxon Mobile [XOM] was off 20.79% and International Business Machines

[IBM] returned -13.82%). Of note on an issue basis, Health Care issue UnitedHealth Group (UNH)

rebounded 16.28%, as it returned to the black YTD, up 1.44%. Apple added 11.07% for the month and

was up 57.70% YTD. Boeing fell 10.66% for the month and remained up 5.40% YTD (but as stated,

has been the best-performing issue since the 2016 election).

S&P MidCap 400

The S&P MidCap 400 posted its second month of gains, adding 1.03% after last month’s 2.90% gain,

but still failed to cover August’s broad decline of 4.35%, leaving it in the red for the three-month period,

off 0.58% (the only negative core index). Year-to-date, the index maintained a respectable double-digit


MARKET ATTRIBUTES 7

gain of 17.58% (although it continued to trail the S&P 500’s 21.17%), as its one-year performance

(helped by the calendar) returned to the black, up 7.14% (it was -4.15% for the one-year period last

month). Looking at longer-term periods, the two-year gain was 6.5% (7.77% last month), the three-year

period was up 29.54%, and the five-year return was 37.83%—all of which underperformed the S&P

500.

Eight of the 11 sectors gained for the month, down from 9 last month and up from 2 the month before

that. Sector spreads decreased, as the difference between the best and worst group decreased to

4.60% from last month’s 8.52% (21.76% the month before that). The YTD spread remained significant,

widening to 55.18% from last month’s 51.57%. The one-year spread was flat at 68.44%. The root of

the large spread was still Energy, as it was down 47.52% over the one-year period, compared with

Information Technology, which was up 20.92% over the one-year period.

For the month of October, issues responded to their earnings and guidance, as well as lower interest

rates and lower oil prices. Real Estate did the best, as interest rates declined, with the sector adding

2.31% and up 19.67% YTD. Industrials was next, up 2.22%, as it posted a 24.84% YTD gain.

Information Technology continued up, gaining 1.85% for the month and up 30.25% YTD (best sector in

the index). Consumer stocks were up, but varied, as Consumer Staples added 0.04% (up 6.60% YTD),

while Consumer Discretionary gained 1.97% for the month (and was up 18.52% YTD). Utilities did the

worst, falling 2.29% and up 11.85% YTD. Financials also fell, off 0.62% (the sector was up in both the

large- and small-cap indices), as the sector was up 17.48% YTD.

Breadth declined, but stayed positive, as 220 issues gained an average of 6.20% each, down from last

month’s 307 gainers (up an average of 6.72% each), as 180 issues declined, an average loss of 5.69%,

up from last month’s 93 decliners (average loss of 4.67%). There were 45 issues that gained at least

10% (an average gain of 15.52%), compared to 64 last month (17 the month before), as 25 issues

declined at least 10%, with an average loss of 17.03%, up from last month’s 13 (113 the month before

that). Significant gains of at least 25% saw three issues do so, the same as last month, as three issues

fell at least 25%, compared to none last month. Year-to-date, breadth declined a tick, as 301 (303 last

month) issues gained (average 29.89%) and 98 (96) were down (-19.24%), with 252 (250) up at least

10% (34.65%) and 64 (55 last month) down at least 10% (-26.93%), while 25% gains were reported for

152 (142) issues, up an average 45.86%, with 27 (25) reporting a loss of at least 25% (-40.50%).

S&P SmallCap 600

The S&P SmallCap 600 added a strong 1.86% on top of September’s 3.15% rebound from August’s

4.64% decline, which left the index in the black for the three-month period, be it 0.20% (better than the

red). Year-to-date, the S&P SmallCap 600 was up 14.25%, the worst of the headline indices, as its

one-year return posted a decline of 1.62% (again, the worst of any core index). Over the longer-term

periods, the two-year return was up 5.85%, with the three-year period up 33.60%. The continuing

underperformance still has not tempted bottom fishing, which has at times created imbalances. At this

point, given the large-cap gains and multiples, some are pointing to a small-cap catch up and

alternative, although the point has not translated into buying (and support).

Sector variance increased, as the difference between the best and worst sector increased to 17.45%

from last month’s 13.60% and August’s 21.03%. For the three-month period it was 35.01%, up from

last month’s 28.28% (30.08% the month before that), as the YTD level jumped to 61.21% from last

month’s jump to 44.76%. The one-year difference was 74.39% (69.86% last month), as Information


MARKET ATTRIBUTES 8

Technology was up 21.28% and Energy was down a devastating 53.11% (off 70.25% over the 10-year

period, but up 44.95% from Y2K).

For October, eight sectors were positive, compared to nine last month and only one the month before

that. Information Technology did the best, adding 5.64% for the month and up 31.55% YTD, the best

small-cap sector. Real Estate was next, up 3.66% and up 22.99% YTD, with Health Care close behind,

adding 3.53% for the month and up 9.08% YTD. Energy posted the worst performance, falling 11.81%

for the month, as it was off 28.66% YTD. Consumer stocks split, as Consumer Discretionary added

1.05% (up 4.79% last month) and was up 10.21% YTD, while Consumer Staples declined 1.94% (up

3.46% last month) and was up 4.19% YTD. Utilities posted a 0.99% gain (the sector was down in the

large and small caps), as it was up 21.79% YTD.

For the month, breadth stayed positive, but declined, as 353 issues gained, an average of 7.99% each,

down from last month’s 463 gainers (and 169 the month before that). On the down side, 244 issues fell

(an average loss of 8.82%), up from last month’s 138 (432 the month before that). Gains of at least

10% were posted by 100 issues (average 17.10%), compared to 168 last month, as 81 issues posted at

least a 10% decline (average -19.35%), compared to 36 last month. For the three-month period, 309

issues were up (average 14.20%) from last month’s 299, and 290 (-14.03%) declined from last month’s

302. Year-to-date, 385 (the same as last month) were up (34.94%) and 212 (215) were down (-

26.00%), while 309 (301) posted gains of at least 10% (42.18%), and 154 (158) had at least a 10% fall

(-33.91%). Extreme changes of at least 25% YTD were posted by 287 (258 last month) issues, with

199 (180) up at least 25% (average 56.10%) and 88 (78) down (-46.01%). Overall, the common link in

the issues are that they are all small caps, as their individual performance continues to differ greatly.

S&P Global BMI

Global markets broadly gained again, as 43 of the 49 markets gained in October, up from September’s

36 and August’s 3. Markets reacted to politics, as the U.S.-China trade issue appeared to be coming to

a phased agreement, the UK and the EU appeared to settle on a plan, and earnings in the U.S. (again)

came in better than expected. Overall, emerging markets did better than developed markets, as the

U.S. (53.3% of the global equity market) underperformed for the second month in a row. October

posted a 2.70% gain, after September’s 1.88% gain and August’s 2.68% decline. Absent the U.S.’s

2.01% gain, the global market was up 3.50% in October.

For the three-month period, global markets turned positive and posted a 1.83% gain, as the return

absent the U.S.’s 1.32% increase was 2.43%. Year-to-date, global markets were up 16.88%, and

absent the U.S.’s 20.74% gain, they were up 12.61%. Longer term, the U.S. also dominated; for the

one-year period, global markets were up 9.78%, and absent the U.S.’s 11.24% gain, they were up

8.13%. The two-year global return was 6.52% with the U.S. gain of 16.40% and -3.35% without it,

while the three-year return was up 29.16% with the U.S. gain of 41.52%, and absent the U.S., it was up

16.79%. For October, the S&P Global BMI increased USD 1,471 billion (up USD 1,896 billion in

September). Non-U.S. markets increased USD 897 billion (up USD 1,379 billion in September), and

U.S. markets increased USD 574 billion (up USD 516 billion in September).

Emerging markets were up 3.85% for the month and up 0.03% for the three-month period; year-to-date,

they were up 9.15% and up 10.89% for the one-year period. Developed markets were up 2.56% for the

month (up 2.40% excluding the U.S), up 2.04% for the three-month period (3.12%), and the YTD return

was up 17.80% (13.63%), with the one-year period up 9.69% (7.45%). Sector variance declined, as 9


MARKET ATTRIBUTES 9

of the 11 sectors gained (10 gained last month and 3 gained the month before that). The spread

between the best (Health Care, 4.96%) and worst (Energy, -0.36%) sectors for the month was 5.32%

(the one-year average was 7.44%), up from last month’s 5.24%; year-to-date, the spread was 29.57%

(24.13% last month).

Emerging markets posted a gain of 3.85%, after last month’s 1.16% gain (two months of declines prior

to that, -4.77% and -1.20%). The three-month gain was 0.03%, the YTD return was up 9.15%, and the

one-year period was up 10.89%. The two-year return was down 4.60%, and the three-year return was

up 15.62%. For October, 20 of the 24 markets were up, compared to 14 last month and only 1 the

month before that. Hungary did the best, up 9.20% for the month and turning positive YTD, up 3.45%.

Taiwan was next, adding 7.21% and up 19.72% YTD, followed by Russia, which was up 6.89% for the

month and up 31.94% YTD. Chile did the worst, as it fell 7.98% and was down 15.69% YTD, followed

by Turkey, which declined 7.33% and was up 1.62% YTD, and then by Saudi Arabia, which lost 5.02%

for the month and was down 1.97% YTD.

Developed markets posted a consolidated 2.56% gain for the month, while the return excluding the

U.S. was higher, at 3.40%. The three-month return was up 2.04% and up 3.12% excluding the U.S.,

the YTD gain was 17.80% and 13.63% excluding the U.S., and the one-year return was 9.69% and

7.45% excluding the U.S. The two-year return was up 7.87% but off 2.99% excluding the U.S., and the

three-year return was 30.79% and 17.15% excluding the U.S. For October, 23 of the 25 markets

gained, up from last month’s 22 and only 2 in August. Sweden did the best for the month, up 6.86%

and up 14.79% YTD. Ireland was next, adding 6.62% and up 18.58% YTD, followed by Germany,

which gained 5.94% for the month and was up 13.65% YTD. Belgium did the worst, declining 2.11%

and up 18.68% YTD, with Canada the other down market, off 0.35% for the month and up 19.08%

YTD. Of note, Japan added 4.97% (up 13.82% YTD), and the UK increased 3.03% (10.04% YTD).


MARKET ATTRIBUTES 10

PERFORMANCE RECAP

Exhibit 2: Monthly Returns

S&P 500 PRICE 1-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%) 5-YEAR (%) FR 12/99 (%)

Energy 426.66 -2.40 0.61 -14.22 -15.49 -33.47 100.57

Materials 364.73 0.02 15.19 10.96 24.38 19.83 128.01

Industrials 661.33 0.98 21.98 12.57 33.75 39.28 141.91

Consumer Discretionary 950.01 0.29 21.56 14.19 53.10 75.94 217.40

Consumer Staples 627.29 -0.33 20.20 10.70 15.89 30.44 201.51

Health Care 1095.58 5.00 9.43 6.71 40.68 40.67 235.26

Financials 475.99 2.24 20.23 9.21 45.23 48.19 47.95

Information Technology 1467.20 3.81 34.81 20.69 83.25 118.70 81.71

Communication Services 171.82 2.73 23.81 13.88 8.89 6.84 -46.77

Utilities 325.85 -0.80 21.31 19.63 29.91 41.11 128.77

Real Estate 243.21 -0.16 26.43 22.61 28.29 34.20 -

S&P 500 3037.56 2.04 21.17 12.02 42.87 50.52 106.74

DOW JONES INDUSTRIAL AVERAGE

PRICE 1-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%) 5-YEAR (%) FR 12/99 (%)

Dow Jones Industrial Average 27046.23 0.48 15.94 7.69 49.08 55.52 135.24

S&P MIDCAP 400 PRICE 1-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%) 5-YEAR (%) FR 12/99 (%)

Energy 221.91 -1.64 -24.93 -47.52 -47.24 -71.89 26.47

Materials 451.25 1.29 12.75 2.41 15.86 21.74 306.64

Industrials 1076.14 2.22 24.84 16.63 46.26 54.48 504.51

Consumer Discretionary 762.53 1.97 18.52 6.51 22.45 18.32 283.34

Consumer Staples 1688.96 0.04 6.60 -2.18 1.72 14.20 869.46

Health Care 1877.75 0.42 10.70 -0.20 54.27 80.65 961.39

Financials 978.05 -0.62 17.48 7.22 28.19 43.14 195.62


Communication Services 164.70 0.34 11.42 3.87 -29.74 -40.80 -65.19

Utilities 613.12 -2.29 11.85 13.18 29.50 44.86 342.63

Real Estate 244.73 2.31 19.67 11.83 6.54 - -

S&P MidCap 400 1955.37 1.03 17.58 7.14 29.54 37.83 339.74

S&P SMALLCAP 600 PRICE 1-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%) 5-YEAR (%) FR 12/99 (%)

Energy 225.26 -11.81 -29.66 -53.11 -62.97 -83.50 44.95

Materials 449.87 -0.42 10.72 -4.85 14.58 1.20 226.32

Industrials 1135.63 2.57 23.11 8.61 45.51 54.34 467.99

Consumer Discretionary 559.41 1.05 10.21 -1.83 31.35 29.22 312.76

Consumer Staples 1728.78 -1.94 4.19 -9.12 15.56 31.86 767.21

Health Care 2822.57 3.53 9.08 -3.82 75.78 101.18 1459.09

Financials 1056.43 1.67 11.32 2.54 32.75 43.21 260.67


Communication Services 2.86 1.42 2.14 -14.88 14.86 18.42 -96.11

Utilities 1130.77 0.99 21.79 17.87 43.01 77.19 502.43

Real Estate 210.42 3.66 22.99 13.99 9.94 - -

S&P SmallCap 600 965.35 1.86 14.25 1.62 33.60 42.07 388.07




Exhibit 3: Total Returns

INDEX 1-MONTH (%) 3-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%) 5-YEAR (%) 10-YEAR (%)

S&P 500 2.17 2.43 23.16 14.33 51.73 66.81 260.96

S&P MidCap 400 1.13 -0.14 19.20 9.02 35.99 49.44 245.94

S&P SmallCap 600 1.95 0.60 15.67 3.24 39.46 52.54 267.68

S&P Composite 1500 2.09 2.21 22.70 13.66 50.31 65.23 261.05

Dow Jones Industrial Average 0.59 1.29 18.19 10.32 60.07 75.70 258.10

Source: S&P Dow Jones Indices LLC. Data as of Sept. 30, 2019. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

Exhibit 4: S&P Global BMI, Emerging, Sorted by October Performance

BMI MEMBER 1-MONTH (%) 3-MONTH (%) 6-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%)

Global 2.70 1.83 1.55 16.88 9.78 29.16

Global Ex-U.S. 3.50 2.43 0.53 12.61 8.13 16.79

Emerging 3.85 0.03 -2.75 9.15 10.89 15.62

Hungary 9.20 4.66 -3.24 3.45 12.38 31.68

Taiwan 7.21 7.52 5.69 19.72 19.58 26.99

Russia 6.89 3.37 12.65 31.94 23.85 44.60

Greece 6.66 1.98 15.24 40.40 29.01 35.10

Colombia 6.57 1.83 -0.37 20.02 13.61 6.82

Poland 5.99 -3.35 -6.56 -5.26 1.44 18.50

Pakistan 5.93 6.34 -18.41 -20.68 -35.24 32.89

Brazil 5.92 -2.03 9.76 16.95 12.23 22.13

Philippines 4.66 -0.77 1.98 10.21 16.88 1.56

China 3.95 -0.85 -8.89 8.79 9.48 20.48

Mexico 3.86 5.62 -3.17 7.88 5.53 -11.45

India 3.73 4.30 -1.35 4.55 15.93 22.84

South Africa 3.59 -6.37 -10.17 -0.78 6.21 -7.00

Czech Republic 3.19 -4.43 -4.61 -5.48 -6.13 11.79

Peru 3.13 -0.81 -8.07 -0.35 -0.96 33.89

Egypt 3.04 11.19 3.98 28.11 26.44 1.30

Indonesia 2.73 -3.41 -1.28 4.35 17.70 2.41

Malaysia 1.02 -3.91 -4.69 -3.22 -4.21 -3.70

Kuwait 0.80 -6.69 1.96 13.24 14.53 46.51

U.A.E. 0.27 -7.51 -6.85 0.56 -4.69 -5.12

Thailand -0.83 -4.31 1.33 12.12 6.98 24.09

Qatar -1.54 -4.08 -4.61 -5.35 -5.25 -0.73

Saudi Arabia -5.02 -12.10 -17.99 -1.97 -3.02 29.75

Turkey -7.33 -6.61 8.80 1.62 8.05 -32.92

Chile -7.98 -10.21 -17.72 -15.69 -15.51 -10.09




Exhibit 5: S&P Global BMI, Developed, Sorted by October Performance

BMI MEMBER 1-MONTH (%) 3-MONTH (%) 6-MONTH (%) YTD (%) 1-YEAR (%) 3-YEAR (%)

Developed 2.56 2.04 2.05 17.80 9.69 30.79

Developed Ex-U.S. 3.40 3.12 1.49 13.63 7.45 17.15

Sweden 6.86 5.00 2.38 14.79 8.55 19.45

Ireland 6.62 7.27 2.66 18.58 7.23 19.97

Germany 5.94 5.20 -0.05 13.65 4.75 13.50

Austria 5.88 2.72 -3.82 13.43 -1.99 32.63

Portugal 5.17 4.41 -1.31 9.77 4.25 14.52

Japan 4.97 7.11 6.43 13.82 6.58 17.10

Italy 4.91 5.99 2.56 19.16 15.33 31.14

Singapore 4.90 -0.45 -1.83 10.48 12.37 21.39

Korea 4.80 5.88 -3.81 0.48 2.00 8.40

Hong Kong 4.34 -5.56 -10.61 2.75 9.11 7.75

Luxembourg 3.81 -2.49 -14.33 -13.53 -23.25 -17.94

Denmark 3.66 4.12 1.73 14.26 12.62 24.77

France 3.38 3.88 1.76 17.47 9.39 29.68

United Kingdom 3.03 1.57 -3.14 10.04 3.14 11.80

Israel 2.76 -0.30 -1.35 13.81 6.33 17.04

United States 2.01 1.32 2.43 20.74 11.24 41.52

Spain 1.97 2.00 -4.28 5.43 2.12 3.18

Switzerland 1.91 2.60 7.89 21.74 15.05 31.99

Netherlands 1.74 2.24 2.60 22.50 17.60 37.70

Finland 1.64 2.24 -1.46 3.59 -2.02 12.02

Australia 1.50 -2.02 3.55 16.05 11.77 15.07

New Zealand 1.39 -4.07 2.86 16.18 20.12 28.16

Norway 0.12 -1.04 -7.16 2.06 -11.45 12.36

Canada -0.35 -0.01 1.18 19.08 8.79 13.07

Belgium -2.11 -4.15 -0.71 18.68 9.75 -2.68




Exhibit 6: Price-to-Earnings Ratios

INDEX 2016 2017 2018 ESTIMATED 2019

S&P 500 21.07 21.47 20.04 19.08

S&P 500 Consumer Discretionary 19.45 22.29 23.85 24.22

S&P 500 Consumer Staples 20.99 21.50 21.37 21.01

S&P 500 Energy -158.88 40.17 13.93 20.24

S&P 500 Financials 16.25 17.45 15.23 12.00

S&P 500 Health Care 18.77 21.21 21.89 18.21

S&P 500 Industrials 19.88 21.06 17.66 18.07

S&P 500 Information Technology 21.27 21.87 23.03 22.54

S&P 500 Materials 23.99 22.06 16.90 20.16

S&P 500 Communication Services 17.91 16.31 14.59 20.10

S&P 500 Utilities 18.06 18.40 21.15 20.78

S&P 500 Real Estate 25.78 36.40 38.00 36.96


S&P MidCap 400 25.73 24.33 20.37 19.32



S&P 400 Energy -9.56 -263.86 -168.11 121.93

S&P 400 Financials 20.15 19.51 15.61 11.78

S&P 400 Health Care 26.19 30.96 31.63 21.76

S&P 400 Industrials 20.87 22.44 19.37 19.00


S&P 400 Materials 23.95 18.64 12.36 16.44

S&P 400 Communication Services 82.36 -12.96 22.75 23.43

S&P 400 Utilities 20.07 20.16 23.97 22.94

S&P 400 Real Estate 28.30 31.33 26.12 32.16


S&P SmallCap 600 32.73 30.02 24.73 22.95



S&P 600 Energy -6.44 -27.40 30.61 -34.03

S&P 600 Financials 21.61 19.29 17.36 14.13

S&P 600 Health Care 126.38 -513.58 184.00 69.90

S&P 600 Industrials 24.57 23.94 21.00 18.51


S&P 600 Materials 25.45 22.76 17.26 17.97

S&P 600 Communication Services 41.43 284.00 -286.00 -

S&P 600 Utilities 23.24 26.50 29.05 31.61

S&P 600 Real Estate 29.05 33.24 48.71 38.40

Source: S&P Dow Jones Indices LLC. Data as of Oct. 31, 2019. Past performance is no guarantee of future results. Table is provided for illustrative purposes.



Exhibit 7: Operating EPS Changes

INDEX Q4 2018

OVER Q4 2017 (%)

Q1 2019 OVER

Q1 2018 (%)

Q2 2019 OVER

Q2 2018 (%)

Q3 2019E OVER

Q3 2018 (%)

Q4 2019E OVER

Q4 2018 (%)

2018 OVER

2017 (%)

2019E OVER

2018 (%)

S&P 500 3.49 3.97 3.86 -3.26 17.16 21.76 5.01

S&P 500 Consumer Discretionary 0.52 -0.87 -3.06 1.53 -3.93 13.05 -1.56

S&P 500 Consumer Staples -4.04 3.25 0.00 -3.07 7.43 7.47 1.74

S&P 500 Energy 214.68 -40.48 -17.87 -26.42 -38.72 130.40 -31.16

S&P 500 Financials -34.64 39.21 13.39 -6.55 109.45 17.53 26.91

S&P 500 Health Care 7.36 16.79 18.49 11.49 34.83 10.98 20.24

S&P 500 Industrials 14.39 -5.49 -4.02 0.00 0.45 23.61 -2.24

S&P 500 Information Technology -0.87 -8.04 6.10 -1.32 11.38 25.93 2.18

S&P 500 Materials 20.45 -26.23 -23.38 -13.18 4.19 25.61 -16.17

S&P 500 Communication Services 11.86 -41.78 -45.13 -8.96 10.14 15.72 -27.42

S&P 500 Utilities -23.53 -7.42 -2.87 -2.53 35.47 6.06 1.75

S&P 500 Real Estate 28.99 -4.03 46.21 -0.60 -23.60 14.29 2.81

INDEX Q4 2018

OVER Q4 2017 (%)

Q1 2019 OVER

Q1 2018 (%)

Q2 2019 OVER

Q2 2018 (%)

Q3 2019E OVER

Q3 2018 (%)

Q4 2019E OVER

Q4 2018 (%)

2018 OVER

2017 (%)

2019E OVER

2018 (%)

S&P MidCap 400 -4.89 8.25 1.24 -9.66 26.93 22.86 5.43

S&P 400 Consumer Discretionary 24.14 -19.54 -16.65 -14.75 -18.81 20.91 -17.39

S&P 400 Consumer Staples -4.69 -21.58 -7.32 -1.82 17.30 12.65 -4.78

S&P 400 Energy -81.69 -79.66 183.79 -1976.19 47.62 17.50 237.88

S&P 400 Financials -31.35 43.05 13.73 7.59 100.21 20.93 32.55

S&P 400 Health Care -88.81 62.85 3.08 -7.03 1230.67 15.01 45.33

S&P 400 Industrials 22.51 8.30 -5.83 3.26 3.53 21.63 1.96

S&P 400 Information Technology 47.19 -5.38 -8.94 1.88 31.09 32.16 6.92

S&P 400 Materials 5.08 2.05 -28.23 -37.07 -28.72 32.87 -24.82

S&P 400 Communication Services 185.34 -24.73 21.38 -11.57 9.82 163.62 -2.90

S&P 400 Utilities -17.91 7.49 -30.42 4.43 25.59 -2.25 4.50

S&P 400 Real Estate -36.25 -12.61 -29.70 -38.19 27.45 28.71 -18.78

INDEX Q4 2018

OVER Q4 2017 (%)

Q1 2019 OVER

Q1 2018 (%)

Q2 2019 OVER

Q2 2018 (%)

Q3 2019E OVER

Q3 2018 (%)

Q4 2019E OVER

Q4 2018 (%)

2018 OVER

2017 (%)

2019E OVER

2018 (%)

S&P SmallCap 600 15.62 -23.41 4.47 9.34 38.69 25.17 7.76

S&P 600 Consumer Discretionary 12.38 -8.93 -11.00 13.08 31.29 38.56 8.32

S&P 600 Consumer Staples -56.15 -43.99 5.62 119.03 120.13 -8.99 10.47

S&P 600 Energy 365.57 -6436.36 145.89 -188.04 -109.10 135.90 -189.95

S&P 600 Financials -37.73 9.61 -9.65 19.70 113.35 13.16 22.86

S&P 600 Health Care 70.99 -140.53 -75.75 4215.00 747.68 434.93 163.23

S&P 600 Industrials 18.50 3.14 13.06 16.51 18.23 22.26 13.44

S&P 600 Information Technology 1.61 -59.77 -24.49 30.44 45.55 -1.95 1.63

S&P 600 Materials -24.95 -13.55 -11.14 -23.27 61.29 12.23 -3.99

S&P 600 Communication Services 400.00 -100.00 150.00 0.00 -33.33 - 100.00

S&P 600 Utilities -4.38 -26.38 -29.74 77.66 16.10 7.51 -8.12

S&P 600 Real Estate -102.94 34.85 58.06 -49.77 2750.00 -29.41 26.85




Exhibit 8: Breadth of Change (Issues with Monthly Price Changes as Described by Type)

S&P 500

TYPE OCTOBER 2019 AVERAGE %

CHANGE 3-MONTH

AVERAGE % CHANGE

YTD AVERAGE %

CHANGE

Up 290 5.54 280 8.10 419 27.04

Down 214 -4.63 225 -8.33 81 -15.04

Up >= 10% 44 15.09 82 16.22 357 30.80

Down <= -10% 22 -14.14 65 -17.57 46 -22.98

Up >= 25% 4 31.87 9 28.46 197 41.40

Down <= -25% 1 -27.26 11 -32.77 15 -36.47

Up >= 50% 0 0.00 0 0.00 45 61.49

Down <= -50% 0 0.00 1 -50.39 1 -58.92

S&P MIDCAP 400


CHANGE 3-MONTH

AVERAGE % CHANGE

YTD AVERAGE %

CHANGE

Up 220 6.20 200 9.83 301 29.89

Down 180 -5.69 199 -11.67 98 -19.24

Up >= 10% 45 15.52 81 17.81 252 34.65

Down <= -10% 25 -17.03 86 -20.80 64 -26.93

Up >= 25% 3 31.28 12 35.23 152 45.86

Down <= -25% 3 -33.25 22 -37.17 27 -40.50

Up >= 50% 0 0.00 1 61.06 43 69.87

Down <= -50% 0 0.00 2 -54.27 6 -55.35

S&P SMALLCAP 600


CHANGE 3-MONTH

AVERAGE % CHANGE

YTD AVERAGE %

CHANGE

Up 353 7.99 309 14.20 385 34.94

Down 244 -8.82 290 -14.04 212 -26.00

Up >= 10% 100 17.10 156 23.42 309 42.18

Down <= -10% 81 -19.35 139 -24.47 154 -33.91

Up >= 25% 12 33.09 47 40.64 199 56.10

Down <= -25% 15 -36.43 47 -39.74 88 -46.01

Up >= 50% 0 0.00 7 83.75 86 83.38

Down <= -50% 1 -53.35 8 -67.19 29 -64.56

DOW JONES INDUSTRIAL AVERAGE


CHANGE 3-MONTH

AVERAGE % CHANGE

YTD AVERAGE %

CHANGE

Up 17 5.12 18 5.81 25 20.54

Down 13 -4.40 12 -6.76 4 -11.56

Up >= 10% 2 13.68 2 14.30 17 27.20

Down <= -10% 2 -11.26 2 -12.43 3 -15.11

Up >= 25% 0 0.00 0 0.00 9 35.87

Down <= -25% 0 0.00 0 0.00 0 0.00

Up >= 50% 0 0.00 0 0.00 1 57.70

Down <= -50% 0 0.00 0 0.00 0 0.00




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