![What’s next in the evolving Evergrande situation?](/content/dam/invesco/emea/en/insights/Hooper-Evergrande-29092021.jpg)
What’s next in the evolving Evergrande situation?
Kristina Hooper and her global team summarize what has happened in the Evergrande situation, what the next steps may be, and how this impacts their view of the markets.
For those who don’t know me well, I must confess that I am a movie buff — and I enjoy bad movies almost as much as good movies because of their comedic value. One thing I learned long ago is that if you are looking for a bad movie, typically one need not look any further than a sequel. (As my 15-year-old daughter would say, “Facts.”) While there are always exceptions, movie studios tend to fast-track sequels because they know there is a built-in fan base, but sometimes that leads to rushed scripts and rushed production — and lots of unintended laughs. Cases in point include “Son of the Mask,” “The Next Karate Kid,” “Jaws 3,” and “Jaws 4” as well as “Friday the 13th Part VIII: Jason Takes Manhattan.” As the mother of a 19-year-old who is convinced he wants to be a screenwriter, I take comfort in knowing that, if nothing else, he will probably always be able to find work writing scripts for sequels.
The reason I bring up sequels is because September was an awful month for stocks — the S&P 500 Index experienced its worst performance since March 2020. And it’s not just US stocks — global equities also suffered. That begs the question: where do we go from here? Will October be an ugly sequel to September? Or will it be the start of a new chapter for the market?
Some strategists are pointing to technical models that suggest October could be a worse month for stocks than September. We all know that some terrible stock market sell-offs have occurred in Octobers past, so there is legitimate concern that this October might follow that script. But whether or not this month proves to be difficult for stocks, I feel strongly about the importance of staying invested in the stock market — and, for those with cash on the sidelines, looking for buying opportunities if there are sell-offs.
Following are some compelling reasons to be positive on the stock market, in my view:
Again, this doesn’t mean we won’t see sell-offs in October, but I still believe stocks will finish the year higher than where they are now.
Here are just a few things to watch in October:
And so while October inspires fear in investors because of its track record of a few high-profile crashes, we must remember that most Octobers are fairly sanguine. Having said that, October 2021 could be an ugly sequel. I certainly wouldn’t be surprised to see heightened volatility and nervous investors. But while I see bad movie sequels for their comedic value, I would view an ugly market sequel as a buying opportunity.
1 Source: New York Times, Oct. 4, 2021
2 Source: Merck, Oct. 1, 2021
3 Source: Refinitiv
4 Source: Business Insider, “Trading in Evergrande shares has been suspended pending a 'major transaction' - and as another debt test looms,” Oct. 4, 2021
5 Source: Fitch Ratings, “Debt Limit Brinkmanship Could Put Pressure on US ‘AAA’ Rating,” Oct. 1, 2021
6 Source: PredictIt, as of Oct. 3, 2021
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