Many market participants expect stocks to fall at this time of year, in what's known as the October Effect. Will we see that after the September sell-off this year, or will things turn around? What are the best stocks to buy in October?
In Sep. 2021, all three major U.S. indexes fell after a positive streak.
Why did stocks fall in September?
According to Stock Trader’s Almanac, September is the worst month for stock markets, bringing a decline of 0.4 percent on average. Analysts sometimes attribute this seasonal phenomenon to investors making portfolio changes to cash in at summer's end.
All three major U.S. indexes finished lower in Sep. 2021. The S&P 500 lost 4.8 percent, the most in a month since Mar. 2020. Major concerns that shook markets were the U.S. government shutdown amid the threat of a debt ceiling crisis, instability in China’s real estate market, COVID-19 cases surging due to the Delta variant, the Fed tapering bond purchases, and rising inflation.
Will stocks go up in October?
One key determinant for markets will be results season, which is starting mid-month. Investors will be watching for companies’ outlook amid recovery. Markets will also be waiting for the Fed’s comments for hints at its future steps. Depending on the outcome of these events, stocks could rise.
The best stocks to buy in October
After falling in Sep. 2021, some stocks look like attractive buys. Even the ones that rose still look like good long-term bets. Ford stock, which rose 9 percent in the month on news of a large manufacturing investment, is one. The company’s aggressive push into EVs (electric vehicles) bodes well, too, and it still looks cheap compared with pure-play EV startups that haven't even delivered a vehicle yet.
Although NIO stock fell more than 9 percent in Sep. 2021, its fundamentals remain strong and there are many catalysts that could boost the stock. The company is continuing its international expansion while China's crackdowns on sections of the market and are dragging down Chinese stocks, so now could be a good time to get NIO at a bargain.
Paysafe stock hit an all-time low toward the end of Sep. 2021, almost 48 percent below the all-time high it reached in Apr. 2021. The stock now looks like an undervalued bet on the attractive fintech industry, given its strong fundamentals and industry growth, expanding market share, and exposure to high-growth verticals.
The best dividend stocks to buy in October
Pfizer boasts a dividend yield of 3.6 percent. The company's COVID-19 vaccine was the first to be approved by the FDA, and along with BioNTech, it has submitted the initial data for its vaccine in children 5–12 years of age.
Southern Copper could be another solid dividend play with a forward dividend yield of 6.3 percent. The ongoing bullish sentiment for commodities, including copper, makes it a good bet.
Chevron, which has raised its dividend for more than 25 years, looks like another good buy amid energy names' resurgence. Its dividend yield stands at 5.3 percent.