Boring Won October: What Sold and What Held, Month to Date

The S&P 500 ended October 23 about 2.5% below its high. The Nasdaq had its worst day since June on the 22nd, then fell again on the 23rd. By index standards, nothing broke.

Under the index, something did. From the September 30 close through October 23, the Invesco S&P 500 Low Volatility ETF rose 7.0% while the Invesco S&P 500 High Beta ETF fell 9.8%. The iShares MSCI USA Momentum Factor ETF fell 8.8%. Value beat growth by more than eight points: the iShares Russell 1000 Value ETF gained 3.8% and the Russell 1000 Growth ETF lost 4.5%. The stocks that move least, surprise least and had run least were the ones investors wanted.

The backdrop: war, oil, rates, inflation, an election and AI

Few months stack this many shocks on one another.

War and oil. Fighting around the Strait of Hormuz, including Iranian naval mines that halted tankers on October 20 and Houthi attacks claimed against Saudi energy sites, kept a risk premium in crude. Brent reached about $111 a barrel on October 20, a five-month high, and pushed toward $115 on the 23rd. Energy was the best sector of the month.

Rates. The 10-year Treasury yield touched about 5.36% intraday on October 7, its highest level in more than two decades, and briefly passed 5.3% again after the inflation report on the 14th. A 10-year near 5% raises the discount rate on earnings that are far in the future, which is where much of the value in fast-growing companies sits. Later in the month, the move reversed: as stocks sold off, investors bought long Treasuries, and the iShares 20+ Year Treasury Bond ETF ended the period up 5.0%. Gold did not play its usual role; the SPDR Gold Trust fell 3.7%.

Inflation. September CPI rose 3.7% from a year earlier against expectations of 3.6%, and core prices rose 0.3% on the month, also above forecasts. Traders raised the odds of a rate hike at the Fed's October 27 to 28 meeting, and New York Fed President John Williams said one more hike may be appropriate this year.

The election. The November 3 midterm elections added a layer of uncertainty. Market commentators were less focused on any single outcome than on the prospect of a divided or fragile government. Historically, the stretch before midterm elections has often been volatile: a Cantor Fitzgerald analysis found the S&P 500 fell 5% or more during September and October in 15 of the 24 midterm years since 1930. History is context, not a forecast.

AI. Underneath all of it sat the question that has driven markets for two years: whether the money being spent on AI will earn a return. October tested it three ways: CoreWeave's debt load, Asian chipmakers' sell-off and margin guidance, and Big Tech earnings that showed how much cash the buildout consumes.

What our factor research adds

We score roughly 1,800 US stocks within each sector on a set of factors. Three of them describe one kind of company. LowVol is beta and realized volatility, inverted: it favors the stocks that move least. Stability is the inverse of how much a company's margins, sales growth, and analyst estimates vary over time: it favors predictable businesses. Discipline favors companies with low accruals, low asset growth, little share issuance, no outsized one-day price spikes, and low idiosyncratic volatility. Together they describe a company that does not surprise you and is not spending aggressively to grow.

Three others describe the opposite. Growth is trailing earnings and sales growth plus an implied growth rate. Sentiment is analyst ratings and estimate revisions over the last 30 days and three months. Momentum is 12-month price return, with a tilt to 6 and 3 months. Together they describe a company that has been growing fast, whose analysts have been raising numbers, and whose stock has been going up. In October 2026 that is a description of the AI capex chain.

In our research, the first group led and the second lagged within nearly every sector, which means the pattern was not only about which sectors rose. When we separate the factors from one another, one stood out: Momentum was the factor that lost on its own, in almost every measurement window. Growth and Sentiment fell mainly because the fast growers with rising estimates were the same stocks that had already gone up. The month was a momentum unwind.

These are research measurements of how groups of stocks behaved, not results of any portfolio or strategy.

Sectors and size

Measured by the SPDR sector ETFs from the September 30 close through October 23, nine of eleven sectors rose while the S&P 500 slipped 0.3%. Energy led at +12.7% as oil climbed past $100. Behind it came consumer staples at +9.5%, utilities at +7.9% and health care at +6.4%. Technology fell 6.4%, communication services 4.9% and industrials 1.4%. Technology and communication services carry heavy weights in the index, which is why a month in which most sectors rose left it slightly lower.

Defensive against cyclical was not close. Staples, utilities and health care averaged +8.0%. The other eight sectors averaged +2.3%, and +0.8% without energy. The split repeated on each stress day. On October 14, the day of the CPI report, technology fell 3.0% while staples rose 2.2% and health care 2.5%. From October 14 to 16, technology fell another 3.7% while staples rose 1.8% and health care 1.6%. Over the earnings days of October 20 to 22, technology fell 1.7% and staples rose 2.6%.

Size was a smaller part of the story. The iShares Russell 2000 ETF fell 0.8% for the month against 0.3% for the SPDR S&P 500 ETF. Small caps took the rate scare harder, falling 1.9% against 1.1% on October 14, but held up better on the AI days, rising 0.3% from October 20 to 22 while the S&P 500 fell 0.7%. The selling was aimed at a kind of company, not a size of company.

What drove it, window by window

Oct 6 to Oct 8. The first break. The 10-year touched its high for the month on the 7th, and the Nasdaq fell 1.25% on the 8th as Goldman Sachs warned about forward returns. Strait of Hormuz headlines added to it. High-beta stocks fell 3.0% and momentum 2.2% over the two days; low-volatility stocks edged up 0.3%, and energy rose 2.3%.

Oct 13 to Oct 14. September CPI came in above expectations, and traders started pricing a Fed hike at the October meeting. The S&P fell 1.1%, the Nasdaq 1.9%, information technology 3.0%. Health care rose 2.5% and staples 2.2%. The Russell 2000 fell 1.9%. High-beta stocks fell 4.1% in a day; low-volatility stocks rose 0.4%.

Oct 14 to Oct 16. A one-day bounce on the 15th when the producer price report brought yields down, then the AI financing worry arrived. CoreWeave, carrying about $50 billion of debt, slid and took the group with it; Korea's Kospi fell 8% with Samsung down 9% and SK Hynix down 11%; TSMC beat but guided gross margin lower and fell 4%. The Nasdaq fell 2.3% on the 16th. Momentum fell 3.8% across the two days, its worst stretch of the month, while long Treasuries rose 1.5%.

Oct 16 to Oct 20. The only reversal. A technology bounce on the 19th and a 500-point Dow day on the 20th. High-beta stocks recovered 1.5% and technology 1.1%. In our research, momentum still lost ground once the other factors were separated out, which suggests the unwind paused rather than stopped.

Oct 20 to Oct 22. Big Tech earnings, against Brent at its highest level since spring. Meta beat expectations and fell 7% after reporting its first cash outflow in over a decade on AI spending. The semiconductor index fell 6.7%, its worst day since June; Intel, AMD, Marvell and Sandisk each fell more than 8%. On the other side, Procter & Gamble rose 5.6% and Lockheed 7%. The Nasdaq fell 2.6% and the S&P 1.2%, while the Dow was flat. Low-volatility stocks rose 2.2%, high-beta stocks fell 3.2% and long Treasuries rose 2.0%.

Oct 23. Brent pushed toward $115 on Houthi strikes and the Dow fell 650 points, but the style gaps barely moved. Energy rose 2.6% and large-cap technology edged up; most other areas sold off evenly.

The pattern across these windows is consistent. Four forces took turns: rates (Oct 7 and Oct 14), oil and war (throughout, peaking Oct 20 to 23), AI financing doubt (Oct 16) and AI earnings (Oct 22). Each time, the names that had already run were the ones sold, and the names nobody was excited about were the ones bought.

What this does not say

Three weeks is not a regime. One month of style returns says little about the next.

The macro backdrop is unusual: a 10-year near 5%, inflation running above 3.5%, oil above $100, a war affecting a key shipping route, a Fed that may raise rates, and an election days away. Momentum unwinds in that environment do not generalize to momentum unwinds in a rate-cutting cycle.

The style, sector and size figures are price-based returns of exchange-traded funds over a little more than three weeks. They describe what happened, not what comes next, and the funds differ from one another and from our own factor definitions.

Momentum's weakness says the 12-month winners were sold as a group. It does not say they were wrong.

The practical question

Ask what your portfolio was leaning on before October, not what to buy now. If it leaned on growth, rising estimates and recent winners, those were effectively one position, and October tested it from several directions at once.

Rebalancing back to a target mix is not a view on AI, oil or the election. It is a way to keep a single theme from quietly becoming most of a portfolio. It also has costs: selling appreciated positions can create taxes, trading has transaction costs, and a disciplined mix can lag in months when the winners keep winning. Whether and how to rebalance depends on each investor's goals, taxes and time horizon.

Sources

• Fund returns: adjusted closes, September 30 to October 23, 2026, for SPLV, SPHB, MTUM, QUAL, IWF, IWD, IWM, SPY, TLT, GLD and the eleven SPDR sector ETFs (XLB, XLC, XLE, XLF, XLI, XLK, XLP, XLRE, XLU, XLV, XLY), from end-of-day market data, calculated by Rubric Advisors.
• Factor definitions and research observations: Rubric Advisors factor research, about 1,800 US stocks scored within sector, October 1 to October 22, 2026.
• Oil and the Strait of Hormuz: political.org, Oct 20; investinglive.
• Rates, inflation and the Fed: Trading Economics, US 10-year yield; Ground News briefing on the CPI report.
• Midterm elections: Reuters via Kitco, Sept 9, 2026.
• Market-day detail: Yahoo / Motley Fool, Oct 8; TheStreet; Yahoo, Oct 16; Reuters via Yahoo, Oct 22; CNBC, Oct 23; October 2026 day by day.

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Rubric Advisors, LLC is an investment adviser registered with the State of California DFPI. Registration does not imply a certain level of skill or training.

This commentary reflects market conditions and the views of Rubric Advisors as of October 23, 2026, which may change without notice. It is general information for educational purposes, not personalized investment, tax, or legal advice, and not a recommendation to buy, sell, or hold any security, sector, or strategy.

Style, sector, size, bond and gold figures are price returns of publicly traded exchange-traded funds used as market proxies, measured from the September 30 to October 23, 2026 closes and calculated by Rubric Advisors from end-of-day data. They reflect fund expenses, may differ from the indices the funds track, and do not represent the performance of any Rubric Advisors account, model, or strategy. Group averages are simple averages of those fund returns. You cannot invest directly in an index.

References to Rubric Advisors' factor research describe the direction of relationships observed in our internal scoring of US stocks. They are research observations, not results achieved by any portfolio, and are not an indication of how any portfolio managed by Rubric Advisors has performed or will perform.

Companies named are cited to describe market events and are not recommendations. Rubric Advisors and its clients may hold positions in securities mentioned. Information from third-party sources is believed to be reliable but has not been independently verified, and market expectations described here, such as the odds of a Federal Reserve rate change, can change quickly.

Past performance does not guarantee future results. Investing involves risk, including possible loss of principal. Diversification and rebalancing do not ensure a profit or protect against loss, and rebalancing may have tax consequences; consult your tax professional. See our Disclosures and Form ADV for additional important information.