Equity Market Rebound Triggers Cautious Optimism

Key developments for the month of October include the following: 

• Equity benchmarks posted their highest October return since 1982, following a five-month decline.
• 10-Year U.S. Treasury edged up to 2.3% following a decline in September. This signals an easing in the bond market, however not at the expected rate given the strength of the equity market.
• U.S. Corporate earnings for Q3 exceeded expectations, largely due to a lowering of estimates during the summer.
• The unemployment rate continues to hover near 9%, with more than 45 million Americans receiving food stamps.
• U.S. economic growth in 2012 will remain subdued, while Europe stands at risk to slide into a new recession.
• The U.S. debt level now exceeds $15 trillion, with Social Security, Medicare and Medicaid pushing total commitments near $70 trillion.
• Foreclosure activity has begun to reaccelerate while property values continue to decline.

Following positive news for equity, bonds and corporate earnings, the stability of the global economy continues to hinge upon the European debt crisis. “Hopes are still tied to a European solution for Greece, Portugal, Spain and Italy, yet many questions remain regarding the feasibility of a comprehensive package,” said Ferrara.