Market Escapes Crash: October 2010 Shows Unusual Rally

Market Escapes Crash: October 2010 Shows Unusual Rally

October 1987 was terrible andI recall sitting at the a World Series game in Minnesota watching Kirby Puckett when I got a call from my partner back in Chicagofrom our offices near the exchange, and he said I should get on the next plane because we had trouble brewing on theSaturday before BlackMonday October 19th, 1987.

I jumped on a plane the Friday to head to the series and had flown with a buddy in his little Cessna across Lake Michigan to see the game with some friends, and I was tuggin on his arm explaining that I had to leave early ( this was about 2am in the morning Saturday). He did the best he could to get us out of Minneapolis and get us back to Meigs Field in downtown Chicago (closed now)near the exchange Sunday morning, and little did I know I would walk Monday morning into a 25% decline where our economic system was tested long before Lehman Brothers failed.

I am sincerely glad we escaped October 2010 because nearly every year since then I get palpitations as we creep to the last day of October. This October stocks rose sharply during the first half ofthe monthas expectations mounted that the Fed would start buying Treasury bonds to drive interest rates lower. That, in turn, is supposed to spark spending and lending. In recent days, however, the size of the bond-buying program has been questioned, putting a market rally on hold. John Apruzzese, a partner and portfolio manager at Evercore Wealth Management, said reaction in anticipation in the program is typical of the market.

"This is a classic situation where all the market movement is done in anticipation," Apruzzese said.

The market could be stuck in a holding pattern until the Fed wraps up its meeting Wednesday where it is expected to announce details about the bond-buying program.

A day before the Fed completes its meeting, voters will head to the polls for the midterm elections. Traders have been betting that Republicans will at least take control of the House of Representatives, which could slow government action.

Analysts say uncertainty over tax issues and potential costs from health care and financial regulation reform bills have been major reasons employers have been hesitant to start hiring new workers. The results of the election should provide more clarity about those questions.

With so many people unsure about their jobs, they have cut back on their spending, which accounts for the biggest piece of the nation's economy. While the latest GDP report showed a rise in consumer spending, its still well below pre-recession levels. I don't know what we will see in November but I will guzzle a few beers tonite and think back to those days in 1987.

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