Trading in October: The Data

Mark Twain once wrote in one of his stories:

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”

I have always found this quote to be amazing, but also remarkably interesting when you actually look at the data.

Foremost, when looking at all the major crashes in market history, you have the following events:

• October 1929: -19.9% (start of the Great Depression)

• October 1987: -21.8% (Black Monday crash)

• October 2008: -16.9% (during the Global Financial Crisis)

Three of the largest crashes every occurred in October. But, let’s go a little deeper, because despite the largest crashes happening in October, you may be surprised to learn the following:

• S&P 500 average return in October (since 1950): +0.9%

• Ranks 7th out of 12 months in terms of performance

But also this:

• S&P 500 has been positive in October 60% of the time since 1950

Do, despite being a month that has brought some of the worst crashes on record, it has still managed a rather positive, upbeat trend throughout the month, over history. Now, what’s the takeaway here?

Investors often frame events in their mind, almost as if it gets its own brand and in this case it’s the “October crash theme” when in reality, the data does suggest something slightly different.

Written by Stefan Cheplick, a fintech builder and writer with experience at Stocktwits and TradingView. Background and published work.