“October Effect” & ETF Investors' Insatiable Appetite for Risk

Core Insights - The "October Effect" is a psychological belief that stocks tend to decline in October, although historical data does not support this notion [1][8] - October 2025 has seen increased market volatility due to a government shutdown and economic uncertainty, yet the market is reaching new historic highs [2] - Investors are showing a strong preference for large-cap equity ETFs, particularly those tied to the S&P 500, despite concerns about economic growth [3][4] ETF Flows and Performance - Equity ETFs accounted for 50% of all ETF asset flows in October, with a notable focus on large-cap exposure [3] - The top three ETFs have captured approximately 37% of all equity ETF flows, with significant inflows into the Invesco QQQ Trust, Vanguard Total Stock Market ETF, and others [4][6] - Conversely, small-cap ETFs like the iShares Russell 2000 and Invesco S&P 500 Equal Weight ETF have experienced significant outflows, indicating a lack of diversification interest [4] Gold Investment Trends - Gold has emerged as a favored asset class, attracting substantial investment as a hedge against inflation and market volatility [7] - In October, gold ETFs have seen significant inflows, with the SPDR Gold Shares, SPDR Gold Minishares Trust, and iShares Gold Trust leading the way [9] - Gold's performance has been strong, with a 7% gain in October, reinforcing its status as a safe-haven asset [8]