Historically, looking back over the past 20 years, October is the best performing month with an average return of +2.49%. However, as we pointed out in our October 7 edition of Market Outlook, when things don’t pan out according to historical averages markets get hysterical.
Stock market crashes in October happen just before Halloween and include the one in 1987, the panic in 1907, and the crash in 1929, culminating on black Tuesday (October 29) that ushered in the great depression.
This week’s meltdown on top of the prior declines this month leave the indexes down -10% on average so far this month and almost -16% from the highs in the IWM (Russell 2000) since mid-September. So, the big question lurking in the ether, is whether history will repeat and culminate with something much, much, worse.
The mid-term elections are looming, and recent polls indicate the Democrats are likely to take the House and its anyone’s call as to how that will impact the market. I have heard cogent arguments both bullish and bearish about how the market will react if indeed we have a split on Capitol Hill.
This week’s takeaways are the following:
