After a downbeat September, October started on a volatile note. High oil and gas prices, still-high inflation, and the Fed’s policy tightening spree along with the resultant rise in bond yields may keep the market volatile. But then, October is historically upbeat.

Historically, October has a moderate reputation in the stock market. According to moneychimp.com, a consensus carried out from 1950 to 2022 has revealed that October ended up offering positive returns in 45 years and negative returns in 28 years, with an average positive return of 0.79%.

This year is unlikely to be an exception. While jitters may emanate from rising rates, strength may be added by peaking rates, falling inflation, rebounding manufacturing activities and the upcoming holiday season. Investors should note that the Fed’s preferred measure of underlying inflation increased at the slowest monthly pace since late 2020, which may help the central bank to forgo an interest-rate hike at their next meeting.

The core personal consumption expenditures price index, which bars the volatile food and energy components, increased 0.1% in August. A key gauge of services costs watched closely by the Fed also recorded the smallest monthly increase since 2020.

Against such a backdrop, let’s take a look at the ETFs that could be good picks in October.

ETFs in Focus

Vanguard Total Stock Market ETF VTI – Zacks Rank #2 (Buy)

With the fourth quarter being one of the upbeat times of Wall Street, one can bet on the total market stock. The ETF holds a large basket of well-diversified 3847 stocks with key holdings in technology, consumer discretionary, industrials, healthcare and financials. It charges as low as 3 bps in fees per year from investors

Invesco NASDAQ Internet ETF PNQI – Zacks Rank #2

Tech stocks took a beating in the third quarter. This might help them to stage a rebound in October. Within the pack, Internet stocks deserve special mention. Unparalleled growth of high-speed mobile Internet traffic, still-untapped opportunities in emerging markets especially via the adoption of smartphones and tablets, 5G revolution and a sharp rise in online shopping should translate into the outperformance of Internet ETFs.

Vanguard Consumer Discretionary ETF VCR – Zacks Rank #2

Consumers are expected to shell out a record $12.12 billion (up from $10.6 billion last year) on Halloween this year, according to the National Retail Federation. The average consumer is expected to spend $108.24 on costumes, candy, decorations and greeting cards, $10 more than last year, according to the NRF survey.

A record number of people, i.e. 73% Americans look to celebrate Halloween or participate in Halloween activities this year, up from 69% in 2022. No wonder, retail and consumer discretionary stocks should see a great journey ahead.

Financial Select Sector SPDR ETF XLF – Zacks Rank #1 (Strong Buy)

The journey this year for bank ETFs has been anything but smooth this year. But the tables are probably turning for the segment as the rates are peaking and the yield curve is steepening. Such an interest rate environment will boost banks’ net interest rate margin. Regional deposits and loans also rose in the middle of the year. Plus, most bank ETFs have a cheaper valuation than the S&P 500.

Invesco S&P SmallCap Value With Momentum ETF XSVM – Zacks Rank #2

The pint-sized stocks should gain momentum in the final quarter of 2023 due to a decent U.S. economic recovery, the upcoming holiday season and a still-resilient consumer base. Since small-cap stocks are closely tied to the domestic economy, an uptick in economic outlook bodes well for small caps. These stocks are not heavily export-centric and, hence, do not get battered if the greenback rises. Most importantly, higher rate environment bodes well for the value stocks.
Financial Select Sector SPDR ETF (XLF): ETF Research Reports

Vanguard Total Stock Market ETF (VTI): ETF Research Reports

Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports

Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports

Invesco S&P SmallCap Value with Momentum ETF (XSVM): ETF Research Reports

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