September is typically the worst month in the history of the US stock market, but due to the significant rate cuts by the Federal Reserve and China's stimulus policies, the US stocks surged to near all-time highs this September.

As we enter October, which is usually a strong month for the stock market but also known for volatility and occasional market crashes. Although the stock market did not drop significantly on this Tuesday, Wall Street did not have a pleasant start to October.

US stocks rebounded from the day's lows on Tuesday, but the Dow Jones Industrial Average still fell nearly 175 points, a decrease of about 0.4%, as investors worried that the Federal Reserve may not cut rates as deeply as initially expected. Fed Chair Powell's speech on Monday seemed to suggest a more gradual rate cut approach. The S&P 500 index fell over 0.9%, while the technology-heavy Nasdaq Composite Index and the small-cap Russell 2000 Index each dropped around 1.5%.

Interest rates are not the only focus for investors. Tensions in the Middle East have also put pressure on market sentiment, with Iran launching missiles towards Tel Aviv earlier. Escalation of hostilities could drive up oil prices. The US port strikes are also a concern, as supply chain disruptions due to dockworker strikes may once again raise inflation worries.

The Chicago Board Options Exchange Volatility Index (VIX), also known as Wall Street's 'fear gauge,' briefly soared over 20% before falling back to around 19 on Tuesday after the attack on Israel, marking a 15% increase.

Investors need to calm down.

Jeff Mills, Chief Investment Strategist at Bessemer Trust, said: "There are many factors coming together that still make me moderately optimistic about the stock market." He noted that the US deflationary trend, China's new stimulus policies, and the global trend of interest rate cuts should outweigh geopolitical concerns.

In addition, the mostly positive third-quarter and future corporate earnings expectations are another reason to remain bullish. According to FactSet Research data, analysts expect earnings for the S&P 500 index to grow by nearly 5% in the third quarter, with profit growth accelerating to almost 15% in the fourth quarter and the first quarter of 2025.

Mills believes that at the current level, medical care stocks and industrial stocks look attractive, and he expects the market rebound to further expand.

Solidarity Capital's managing partner Jeff McClean also believes that the "other 493 stocks" outside the top seven of the S&P 500 index will continue to catch up. He is particularly bullish on the Utilities sector, recommending investors to buy the Utilities Select Sector SPDR ETF rather than trying to select individual stocks.

McClean also points out that if global energy demand improves and geopolitical turmoil leads to rising oil prices, oil service stocks will be another benefiting sector. He believes that the industry may see consolidation. McClean's company holds VanEck Oil Services ETF.

However, Mills states that investors should not neglect the 'seven giants'. He says: 'It's hard to be negative on technology stocks because their fundamentals still look promising. Although there may be a re-evaluation of valuations, the technology sector remains supported and has more room for growth. They are strong going into 2025.'

McClean also has no intention of giving up on technology stocks. He holds Alphabet (GOOG.US, GOOGL.US), believing that the company's stock price has been overly suppressed due to regulatory concerns.

Investors should also not overreact to Powell's slightly hawkish comments on interest rates.

Anthony Denier, President and CEO of Webull, said: 'Concerns about inflation, a hard economic landing, and a sense of Federal Reserve inaction should have dissipated when the Fed cut rates by 50 basis points.'

Denier mentioned in an interview that despite recent market volatility, 'retail investors' current overall sentiment is calm.' Looking back at August and early September, the market also experienced significant fluctuations before stabilizing. Therefore, investors may want to take advantage of any pullback opportunities for positioning.

Editor/Lambor