September was a disaster for investors, but October is shaping up to be a better month…

What’s the big deal? In one area of the market, investors are betting that the worst of the recent market sell-off may be over…

The demand for options that protect investors if the market moves down has dramatically fallen. This signals investors aren’t as worried about major market corrections compared to July-September — when the index measuring the demand was near record highs.

Market sentiment changed significantly in the past two weeks, when two potentially devastating events were the topic of conversation:

• The US running out of cash and being at risk of defaulting on its loan — the deadline of which it managed to extend until December.
• China’s largest property developer, Evergrande, is at risk of bankruptcy.

High expectations: Analysts expect strong US earnings growth in the coming weeks — with S&P 500 companies the most optimistic in 5 years. Of the S&P 500 companies that gave forecasts for the third quarter:

• 54% expect earnings to be above previous estimates — the highest in 5 years.
• 74% expect sales to be above previous estimates — the highest since 2006.

Of the 11 sectors making up the S&P 500, the tech sector had the highest number of companies expecting better numbers.

Common consensus: Goldman and JPMorgan advised their clients to buy the dip after the recent pullback — among other bullish investors. But don’t get too comfortable.

• A Deutsche Bank survey shows the majority of market professionals expecting another 5% market drop by year end.
• S&P 500 company valuations are near record highs — which could set the US market up for lower returns in the coming years.