Near-term digestion of market gains is appreciated and hoped for, says CFRA's Sam Stovall

Market Volatility and Trends - October is historically the most volatile month, exhibiting 33% more volatility than the average of other months [2] - Major indices, including the S&P 500 and Russell 2000, were trading more than one standard deviation above their mean, indicating a potential need for market digestion [2][3] - The S&P 500 has not experienced a 3% pullback or greater since April, suggesting a possible correction is due [4] Small Cap Performance - Small caps are expected to catch up as they recently set their first new all-time high in four years, while the S&P has set 89 new highs in the same period [7] - Earnings growth for small caps is projected at over 20% for 2026, compared to 13% for the S&P 500 [7] - Small caps are currently trading at a 35% discount to their 20-year average relative PE on forward estimates [7] Bull Market Insights - Concerns exist regarding the concentration of gains in the current bull market and overall valuation levels [9] - Historically, once a bull market surpasses its third year, the average gain in the fourth year is 13%, with a higher frequency of continuation [9] - There is a need for an acceleration in earnings expectations, as current projections for the S&P 500 are below earlier estimates for December 31, 2024 [10]