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October Was Best Month For S&P 500 Since October 2011, As Goldilocks Economy Continues

US stocks slipped Friday but finished the month with biggest gain in four years. The Standard & Poor's 500 index ended October up 8.3%, according to the Associated Press, its best month since October 2011. The index's increase of 159 points was the biggest in its 77-year history, according to AP.

The stock market has risen five straight weeks since a brief correction that began on August 24, when the Dow Jones Industrials Average in minutes plunged about 1,000 points and the S&P 500 lost as much as 13.4% of its value from its spring highs.

The flash crash of August 24 and subsequent correction was triggered after China devalued its currency and fears spread that a Chinese economic slowdown would kill the long, slow U.S. economic expansion — and, with it, kill the bull market, which already is among the longest bullish runs on record since 1926. Investors have concluded that China's slowdown would not end the U.S. economic recovery, while earnings have come in about as expected.

Meanwhile, the Federal Reserve Wednesday put off a long expected interest rate hike, which also has helped stock prices. In its announcement, the Fed said it would likely put off the rate hike only until December, however. That means the Fed is not concerned about the economy being too weak to withstand a rate hike.

In addition, the Fed's announcement deleted language the central bankers used in postponing the rate hike after the Chinese devaluation and August 24 flash crash. That language alluded to concerns of global weakening and financial market turmoil as justification for delaying the rate hike. The Fed statement Wednesday dropped that language, indicating the Fed sees the U.S. economy as strong enough to withstand a rate hike in December.

Fritz Meyer, an independent economist, says consumer spending underlying growth remains intact, and says the U.S. is benefitting from a "Goldilocks Economy." "While I am still seeing people on cable TV financial channels saying growth is weaker, data on fundamentals in the economy continue to look good," says Fritz Meyer, an independent economist.

Meyer says America's blue-chip publicly-held companies have reported earnings over the last two weeks in line with Wall Street analyst expectations, adding that earnings at companies in the growth sector of the economy are "on fire." (This is not to be taken as an offer or recommendation of securities, which would require a prospectus. It is an observation of what's happening in the economy and how it has affected earnings.) "The recent earnings announcements from Amazon, Alphabet, Apple, Starbucks and Nike were very strong," said Meyer. "People are still talking about weakness in the economy but leaders of the new economy — global growth companies — delivered earnings that show very strong growth."

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This article was written by a professional financial journalist for Houston Asset Management and is not intended as legal or investment advice.

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