10-22-24: If We Make It Through “Black October,” The Market Should Stabilize

by Gary Alexander

October 22, 2024

Thanksgiving is famous for “Black Friday” sales, but the “Black” designations began long ago – and they all came in September or October. Let me list them in historical order rather than in their weekly order:

September 24, 1869, was the first Black Friday, and it involved gold more than stocks. Jay Gould and his partner Jim Fisk cornered the gold market, forcing the Midas metal’s price up on the New York Gold Exchange during September 1869. The premium on gold rose to 69% by Black Friday, but Gould had secretly sold much of his gold, leaving Fisk holding the bag as the premium fell to 33% on Black Friday.

Black Thursday was October 24, 1929, the start of the 1929 market crash, and Black Tuesday came the following week, even though the intervening Monday (October 28th) was worse than the two Black days.

Black Monday came on October 19, 1987, when the Dow fell a then-record 508 points (and still-record 22.6%) on then-record volume (604,330,000 shares), almost twice the previous daily record, which was set the previous Friday. The market day began in Asia, where Monday opened in Singapore, with a 33% drop, a 17% loss in Tokyo and -11% in Hong Kong – which closed for the rest of the week. London fared worse, down 22%. Hearing this news over their breakfast coffee, New York traders sold from the get-go.

Black Wednesday was September 16, 1992, when the pound sterling crashed, forcing Britain to exit the European Exchange Rate Mechanism, after George Soros and others made a massive bet against the pound. In a way, this Big Bet closed our “Black Circle” in its resemblance to the Gold Corner of 1869.

Focusing on stocks, the market’s two worst days – and five of its eight worst days – all fell in October:

Even though October has been a positive month in the 21st century, memories are long about painful past Octobers, and not just the ancient Panics of 1907, 1929 or 1937. To many, the pains of 1987 still sting.

Most investors couldn’t get through to their brokers to sell that day. All circuits were busy. The next morning was even worse. Despite Monday’s record 508 Dow-point loss, there was no buying the next morning either, and then the Toronto gold index fell 22% as investors sold gold to meet margin calls.

More recently, on Thursday, October 23, 1997, the Dow fell 187 points (-2%), the second of four straight declines totaling 900 points (-11%), based on fears generated by the Asian Currency Crisis.

Black Monday, October 27, 1997, was the worst one-day point drop in market history to that date, in Dow points (-554 points, from 7715 to 7161). On a percentage basis, Black Monday #5 was the third worst daily decline since the 1930s (-7.2%), at that time, trailing only two Mondays in late October 1987.

Does This Make Late October the Best Time of Year to Buy?

After seeing all these terrible crashes in Octobers past, it’s good to remember that market lows in October are the first step toward dramatic recoveries in the winter months. Major bull markets often begin in late October. Here are some major 20th Century bull markets which began in late October (this very week):

In addition, a seventh, (2000-02) bear market also ended October 9, 2002. The market then rose 100% in five years. As a result, October gave birth to seven bull markets, vs. just 11 for the other 11 months combined:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In the last two years, we’ve also seen two market panics in October. It’s not likely we’ll see such a “flash crash” again in the next 10 days, but it’s refreshing to review this history and know that it’s fairly certain that if we make it through the Black days of October – and a reasonably certain election result November 5th – we might see smooth sailing for the rest of 2024, since November is historically the strongest month of the year and the fourth quarter generally delivers more gains than the first three quarters combined.

In the last 34 years, since 1990, Jason Bodner has traced daily and monthly market data and found that November is the best performing month in all four major indexes – the Dow Jones Industrials, the S&P 500, the NASDAQ Composite and the Russell 2000. December and October are also positive enough so that the fourth quarter generally provides more average gains than the first three quarters combined.

For three of the four indexes (all but NASDAQ), the fourth quarter almost doubles the first three quarters:

Maybe the best news, as I reminded you here two weeks ago, is that the S&P 500 has rallied strongly in the last two (Trump) presidential election years – contentious ones, like this year – compared to the rather flat performances in the Octobers prior to those elections. This is the table I presented here on October 8th:

So, let’s just make it through the next 10 days of “Black” October fears, and a non-disputed Election, and it should be smooth sailing for the rest of 2024, with several uncertainties about 2025 finally laid to rest.