by Jason Bodner
October 8, 2024
October usually means a reduction in hurricane activity, but new potential threats are popping up. There are a few storms forming in the Atlantic and one possibly forming in the Gulf of Mexico with potentially the same path as Helene. And given Helene’s cataclysmic destruction, that’s very unwelcome news.
October 12th was the date when Christopher Columbus and his crew arrived in the New World in 1492. He, too, encountered hurricanes on his later voyages. In fact, in 1494, he wrote to Queen Isabella about a storm he has forced to go through, providing the first recorded description of a hurricane to Europeans.
October can be a perplexing month for stock investors, too. Before 1990, October was considered a scary month, but since 1990, the month has been strong. Still, it’s not quite that simple…October has been quite volatile. And then, we have Octobers in election years, like now. They often bring an “October Surprise.” These are market-moving scandals designed to embarrass a political opponent. For example: The Iran Contra Scandal, or a candidate’s drunk driving record, or Hunter Biden’s laptop, or Hillary’s emails.
It can leave us questioning how navigable the month really is.
This week, I will investigate what the data tell us about October, and what we might expect.
To begin, Octobers are the start of the seasonally strongest quarter of year. As seen in the table below, average returns for October, November and December, 1990 through 2023, are solidly positive:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The one caveat is that 22 of the last 34 Octobers (since 1990) were positive for the S&P 500 – or 64.7% of the time. Contrast this with a stronger 73.5% for November and 76.5% for December. In any case – the fourth quarter was positive for the S&P 500 71.5% of the time since 1990, which is great!
Octobers have a tumultuous side, too. It turns out that the first half of October is visibly weaker on average than the second half. I looked at all Octobers from 1990 to now and saw some interesting things.
First, in the table on the left, we see that the ratio of unusual buying to selling is in favor of the sellers. The average daily ratio from October 1-15 is 43%. There are 10 of 15 days where the ratio is below 50%.
In the chart on the right, we can see that the first half of the month was less strong than the back half. Note that October 28th sported an average +1.11% day or cumulative +26.7%!
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Naturally, results are skewed from some seriously volatile Octobers of years past, most notably: 2005, 2008, 2011, 2014, 2018, 2020, and 2023, not to mention that off-the-chart traumatic October in 1987.
Now, let’s look at election years encompassing the potential October surprise. The election years in our survey were 1992, 1996, 2000, 2004, 2008, 2012, 2016, and 2020. The first thing we notice in the same chart is that the first half of election year Octobers are weaker than normal years. Election year second halves of October are stronger than regular years. Again, there are volatile years in there, such as 2008:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The post 10-8-24: October is a Month of Mysteries, Surprises and Split Personalities appeared first on Navellier.
