Key takeaways:

• Higher net interest margins have led to a re-rating in bank shares

• Critical minerals are approaching the same level of popularity as iron ore miners across the Selfwealth community

With a gain of 6% across the course of the month, October proved to be one of the best results for the ASX in 2022, putting a near two-year low behind it.

Financials and energy stocks led the rally last month, with the sectors gaining ground amid positive tailwinds including restoring bank margins and higher oil prices. Nonetheless, practically every sector was in the green throughout October, with consumer staples the only area to tread water as investors opted for growth-oriented alternatives.

With risk-on sentiment sweeping over the markets once again, investing for growth was front and centre, and that has prompted a number of changes among the most popular stocks on the Selfwealth platform.

What are the most popular ASX shares and ETFs?

The ASX rally last month was largely a byproduct of strength from the banking cohort, with each of the major names in this sector providing a tailwind for the local market.

Commonwealth Bank (ASX: CBA) remains in top spot as the most held stock in the Selfwealth community, putting further distance between it and second place CSL (ASX: CSL). Meanwhile, Westpac (ASX: WBC) has narrowed the gap with the biotech giant, now within striking distance of a one-two finish for the big banks.After that, it is National Australia Bank (ASX: NAB) in fifth position, ANZ (ASX: ANZ) in seventh spot, and Macquarie Group (ASX: MQG) just one behind.Bank stocks were given a major re-rate last month as the first signs of a turnaround in margins appeared. Regional lender Bank of Queensland (ASX: BOQ) released its earnings report throughout the month, indicating that net interest margins had started to pick up towards the end of the period. With the full effects of rising interest rates still yet to be realised by the banks, and more rate hikes on the way, the share prices of the major banks leapt higher .Growing concerns about the Chinese economy weighed on iron ore miners last month, and Fortescue Metals Group (ASX: FMG) arguably wore the worst of it, with the stock down 12.6%. With that said, some buying support did come in for the monster dividend stock, with the decline in holdings down by the lesser amount of 9%.

With China electing to maintain a COVID-zero approach, and the return of lockdowns across the world second largest economy, demand for steel has been pared back. Adding to the mix is ongoing uncertainty in the Chinese property market. Both of these factors are stifling demand for iron ore, which at one stage was trading at its lowest level in more than two years, below US$80 per tonne.

The third major trend last month, and one that has been playing out for the best part of the last couple years now, concerned renewed interest in lithium stocks. Pilbara Minerals (ASX: PLS) joined the top 10 most held stocks on the Selfwealth platform, also eclipsing Fortescue Metals to become the second most popular mining stock after BHP (ASX: BHP).However, Pilbara wasn't alone with its stellar showing. Core Lithium (ASX: CXO) and Liontown Resources (ASX: LTR) both edged higher into 16th and 17th positions respectively, with the value of their holdings soaring 34.6% and 28.7% compared with September.

A number of catalysts have been behind long-term interest in lithium stocks, but more recently, a number of local permutations are also starting to gather steam. This includes the federal government commitment towards renewables and vehicle electrification, while sales for electric vehicles have gained traction lately. Overseas, the US government has also indicated its willingness to sponsor investment in this area, providing conviction for investors bullish on the critical mineral.

ASX StockCompany1CBACommonwealth Bank2CSLCSL3WBCWestpac4BHPBHP5NABNational Australia Bank6NEUNeuren Pharmaceuticals7ANZAustralia and New Zealand Banking Group8MQGMacquarie Group9AFIAustralian Foundation Inv10PLSPilbara Minerals11FMGFortescue Metals Group12WDSWoodside Energy13TLSTelstra14WESWesfarmers15RIORio Tinto16CXOCore Lithium17LTRLiontown Resources18SOLWashington H. Soul Pattinson and Co19ARGArgo Investments20WHCWhitehaven Coal

With the rebound in global equities across the course of the month, ETF holdings swelled in value, aided by new purchases as well. 

The biggest gains were reserved for ETFs with overseas exposure, including the Vanguard MSCI Index International Shares ETF (ASX: VGS) and Vanguard U.S. Total Market Shares Index ETF (ASX: VTS), where holdings increased by 8.4% and 9.2% respectively. 

These increases were largely fuelled by expectations that central banks, especially the Federal Reserve,  could be nearing an inflection point in winding back the magnitude of interest rate hikes. 

ASX ETFsCompany1VASVanguard Australian Shares Index ETF2VDHGVanguard Diversified High Growth Index ETF3VGSVanguard MSCI Index International Shares ETF4IVVIshares S&P 500 ETF5VTSVanguard U.S. Total Market Shares Index ETF6A200BetaShares Australia 200 ETF7NDQBetashares Nasdaq 100 ETF8VEUVanguard All-World ex-U.S. Shares Index ETF9VHYVanguard Australian Shares High Yield ETF10DHHFBetaShares Diversified All Growth ETF

ASX share trading activity

Meanwhile, leveraged ETFs were one of the most popular ways to gain exposure to the stock market rebound last month. This included the Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ), ETFS Ultra Short Nasdaq 100 Hedge Fund (ASX: SNAS), Betashares Geared Australian Equity Fund (ASX: GEAR), ETFS Ultra Long Nasdaq 100 Hedge Fund (ASX: LNAS), and BBUS U.S Equities Strong Bear Fund (ASX: BBUS).

Between the five funds, which all feature within the top seven most traded securities on the Selfwealth platform in October, more than $160 million worth of units swapped hands. This suggests members of the Selfwealth community still hold mixed views about the outlook for the stock market.

On another note, and at odds with the increase in holdings across the major bank stocks, was trading action that saw several of the Big Four' record a remarkably low level of buying volume relative to selling volume. The worst of the bunch was Commonwealth Bank (ASX: CBA), where more than three in every four trades by value were sell orders.Elsewhere, energy shares are now a popular theme among active investors, thanks in no small part to last month decision by OPEC+ to slash production by two million barrels per day. Aside from oil and gas player Woodside Energy (ASX: WDS), interest remains elevated for coal duo New Hope Corporation (ASX: NHC) and Whitehaven Coal (ASX: WHC), with both initially gaining strong ground on expectations coal demand is likely to increase to offset supply issues for other energy formats.There is also some interest starting to flow through towards more secure and visible' yield investments, with one being the Betashares Australian High Interest Cash ETF (ASX: AAA). The fund ended October as the 16th most traded security, with its popularity no doubt driven by the RBA decision to continue hiking interest rates.Top 20 stocks traded by valueCode SecurityBuy-Sell Ratio1BBOZBetashares Australian Equities Strong Bear Hedge Fund50.4%2PLSPilbara Minerals49.0%3BHPBHP50.9%4SNASETFS Ultra Short Nasdaq 100 Hedge Fund49.3%5GEARBetashares Geared Australian Equity Fund49.4%6LNASETFS Ultra Long Nasdaq 100 Hedge Fund50.4%7BBUSBBUS U.S Equities Strong Bear Fund50.3%8VASVanguard Australian Shares Index ETF57.2%9CXOCore Lithium54.7%10FMGFortescue Metals Group54.4%11WBCWestpac35.6%12NHCNew Hope Corporation56.5%13WHCWhitehaven Coal45.9%14ANZANZ41.6%15CBACommonwealth Bank24.1%16AAABetashares Australian High Interest Cash ETF78.9%17MQGMacquarie Group53.5%18AKEAllkem50.5%19WDSWoodside Energy40.3%20NABNAB46.3%

That all for this Trade Trends report, stay tuned for the next edition this time next month!