Aside from trick or treating kids in costumes, October has a scary history of Market Crashes. It even has a name: The October Effect: “The October effect is a perceived market anomaly that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological expectation rather than an actual phenomenon as most statistics go against the theory. Some investors may be nervous during October because the dates of some large historical market crashes occurred during this month.”
For example: Black Monday, or the great crash of 1987 occurred on October 19, and saw the Dow plummet 22.6% in a single day, arguably the worst single-day decline in history. Another notable October crash led to the Great Depression—an economic disaster that stood unrivaled until the mortgage meltdown nearly took out the whole global economy with it.
While most years October is nothing but boring. This October seems a little more scary than usual.
We have a lot of serious problems that have been piling up from the pandemic, rising inflation, labor shortages, supply chain breakdowns, and divisiveness among political bases all could lead to a real deal October surprise scare. As an investor we must decide whether we are bullish or bearish and how to capitalize and protect our portfolio.
If you are the easily spooked type, maybe taking advantage of any gains you have isn’t the worst idea… and those who don’t scare easily can keep riding the wave. On the other hand Fortunes can be made by contrarians and maybe the herd thinking a crash is coming is a great opportunity to capitalize on the fear of others. No one can predict the future, and we will have to wait and see if this October leads to a crash, or was just a spooky trick.