By Teresa Rivas

Nov 01, 2024, 12:59 pm EDT

Traders at the New York Stock Exchange. (Spencer Platt/Getty Images)
As worrywarts know all too well, not knowing can be worse than getting bad news. And with an election and Federal Reserve meeting still to come, stocks faltered under the weight of the uncertainty this past week.

October ended with a trick, as the S&P 500
SPX

+0.41%
finished down 1% for the month after declining 1.9% on Halloween. It was the index’s worst performance since April and snapped a five-month winning streak, though the market bounced back on Friday.

Still, it shouldn’t be too surprising to investors given that October is the stock market’s most volatile month, especially during election years, and the S&P 500 had been trending lower since midmonth. But it was the first time since 2009 that the S&P 500 was up heading into the last day of October only to finish the month in the red, according to Dow Jones Market Data.

The index ended up gaining 5.5% during the fourth quarter back then and finished 2009 up 23.5%. This year could end in a similar fashion, especially once the election-related volatility has passed, says DataTrek Research co-founder Nicholas Colas. He argues that when the Cboe Volatility Index
VIX

-5.53%
, or VIX, is one to two standard deviations above the long-run average—a level it approached earlier this past week and last crossed in August—it’s a good time for investors to buy stocks, and he remains “positive on U.S. large-caps and [believes] the usual seasonal pattern of strong November-December performance will once again hold true.”

22V Research President Dennis DeBusschere agrees, noting that the election is driving higher volatility but that backdrop “isn’t likely to continue.”

But it may rule the roost near-term. Choppiness was a factor pushing the S&P 500 lower on Thursday to end the month, and he expects volatility “should remain intense through the next two weeks of market clearing events,” including the Federal Open Market Committee meeting on Wednesday and Thursday, inflation data the following week, the end of earnings season, and, of course, Election Day.

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The volatility also makes it a good time for stockpickers to swoop in. BofA Securities’ contrarian Sell Side Indicator, which tracks strategists’ allocation recommendations, while still Neutral, is much closer to a Sell signal than a Buy. BofA equity strategist Jill Carey Hall writes that “elevated sentiment means it’s time to get selective…we still see plenty of opportunities for stock-picking within the index.” She particularly likes high-dividend, large-cap value, and economically sensitive stocks that have been left out of the market rally.

DeBusschere, too, notes that investors who think bond volatility and interest rates will keep dropping can look to buy into recently lagging sectors like consumer durable products, household goods, healthcare equipment, pharma, auto, and real estate investment trusts.

Or they can simply buy the dip in tech. Citigroup equity strategist Scott Chronert notes that “recent weakness has been more acute in winners,” despite relatively healthy results and prudently conservative guidance. While valuation is still a concern, he argues investors should be quick to snap up stocks whose elevated valuations have been taken down a peg.

Because there’s a good chance that this, too, shall pass.

Write to Teresa Rivas at teresa.rivas@barrons.com