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Stocks have Best Month in 24 Years

In spite of a down day, US stocks gained 11.5 percent in October, making it the seventh best month for the US stock market since data was tracked on the Wilshire 5000, the broadest measure of the U.S. stock market. October 2011 was the best month for stocks since January 1987 when stocks earned 12.8 percent

Stocks began five consecutive months of declines in May culminating in a cumulative loss of 16.6 percent when September ended. October started in bad fashion briefly touching bear territory. It appeared as if October would be the sixth consecutive month of losses and much of the media seemed pretty certain.

As is often the case, however, the stock market fooled those who thought they could predict short-term market movements and clocked in one of the best monthly performances in history.

A stronger than expected US economy and the European bailout of Greece are given credit for the strong performance. I happen to think Freakonmics co-author Stephen Dubner had it right when he noted a more appropriate headline for short-term market movements should be:

Stocks Surge, Reasons Unknown; May Be Nothing More Than the Random Fluctuation of a Complex System.
For the year, stocks are now slightly positive turning in a 0.2 percent gain. If stocks hold, 2011 will the the third consecutive year of positive returns.

Other market measures
Narrower indexes also performed well. The S&P 500 gained 10.8 percent, the Dow gained 9.6 percent, and the NASDAQ gained 11.2 percent. Each of these indexes are comprised of far fewer US stocks and do not include the portion of returns that come from dividends paid by the stocks within the indexes.

More on MoneyWatch
Will October be a Sixth Consecutive Month of Stock Losses?
Stocks Fall Fifth Consecutive Month
Market Volatility - Truth or Myth?

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