October: Trick or Treat for the Markets

Jack O' Lantern
Photo: Carole Pasquier
Jack O' Lantern

Investors often may have negative perceptions of October and the markets. After all, the crashes of 1929 and 1987 both occurred in October. In more recent years, the Dow also saw significant 1-day declines of over 7% in the midst of the 1997 Asian financial crisis (10/27/97) and the global meltdown last year (10/14/08).

In fact, the Dow’s top three (and five out of the top ten) 1-day percentage declines for the Dow Industrials have all happened in October.

However, despite those market-shattering events, October (on average) surprisingly isn’t that bad of a month historically for the markets. Of the past eleven Octobers, the Dow has fallen for the month just three times (2004, 2005, and 2008).

Furthermore, according to the Stock Trader’s Almanac, while October is only the seventh best month of the year for the Dow, the index has been up 59% of the time and has posted an (albeit small) average gain of 0.6% since 1950. The authors also note that gains in October have also "turned the tide" in eleven bear markets that have occurred since World War II (1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, and 2002).

It’s worth noting that if the S&P 500 can muster up another gain this October, it would be up 8 straight months, a feat that has only happened three other times since 1984.

Overall October Stats

  • Dow Jones Industrial Avg (since 1896)
    • Average gain of .21%
    • Up 59% of the time
    • Average gain of 1.49% following an up September
  • S&P 500 (since 1928)
    • Average gain of .27%
    • Up 59% of the time
    • Average gain of 1.90% following an up September
  • NASDAQ (since 1971)
    • Average gain of .31%
    • Up 53% of the time
    • Average gain of 1.22% following an up September

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