It isn’t just witches, goblins and sugar overload. October is a scary month for investors.
An FKD Feature exclusive

Major stock market downers in the month of October

 

October has historically seen a lot of market crashes. According to the Stock Market Almanac, a number of major market sell-offs have occurred during the month of October. There were “crashes in 1929 and 1987,” the Almanac read, along with “the 554-point drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989, and the meltdown in 2008.” That sounds bad! Oct. 9 is a particularly scary day because on Oct. 9   of 2007, the market hit the top that preceded the financial crisis, and on Oct. 9, 2002, the market hit the bottom of the bear market, the result of the bursting of the Internet bubble. On Oct. 9 of this year, the Dow Jones Industrial, commonly known as the Dow, rose 58 points while on Oct. 10, it fell 831 points; so much for superstition.

 

Some market lessons and lingo

 

The Dow Jones Industrial Average (DJIA), commonly known as the Dow, is an average of the stock price of 30 significant, publicly traded, U.S. companies. The Dow is the sum of the price of one share of stock for each component company. The DJIA was invented in 1896 by Charles Dow, an editor of The Wall Street Journal and his business partner, Edward Jones.  When people say the market is up, they are generally referring to the Dow. When it was first published, the Dow was at 26. At its highest point ever, in January of 2018, the Dow reached 26,022. The Standards and Poor 500 (S&P 500) is another index used to measure the economy, and includes 500 publicly traded companies that are chosen by a committee. It is calculated based on their market value rather than their stock value. It was invented in 1957 and named after the two founding financial companies.

 

Not that October always marks a lower market

 

In fact, according to the Stock Trader’s Almanac, October is generally a good month for the market. According to the Almanac, October generally shows positive gains and September, on average, has overall negative returns. The best months, according to the Almanac, are the end of the year, November through January, which are significantly better than average. Although October is surprisingly positive, counter to the investors’ jitters, it is a volatile month, and the crashes of 1929, 1987 and 2008 give it a deservedly bad reputation.

Takeaway

 

Although October historically has been associated with some steep market declines, it does not necessarily live up to its reputation as the jinx month. Some economists even suggest it is investor self-fulfilling expectations that make October a volatile month. Whatever the cause, this October has lived up to its bad reputation. It’s been a very volatile month, and the stock averages are all down.

 

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Posted 10.31.2018 - 12:00 pm EST