Is October the cursed month for the stock market?
The expectations of investors can decide the performance of the stock market, and, sadly, this may work against share prices. Since the beginning of the 20th century, October has been related to a lower stock price and prolonged bear markets. The stock market loses one-fifth or more of its value and economic downturns.
As the calendar turns to October each year, it generates a sense of dread for market losses among investors. October has a unique finance position, defined as the October effect, and is one of the financial calendar‘s most hated months.
The Bank Panic of 1907:
Wall Street was threatened by a financial panic, mainly due to regulatory action threats against trusts and diminishing credit. In October 1907, the hysteria began and continued for six weeks. There were several bank runs and strong panic selling at the stock exchange during this period.
Stock Market Crash of 1929:
The 1929 Crash, which started on October 24, was an unparalleled bloodletting because so many individuals had capital invested in the market. The history books left many “black” days, each with their very own record-breaking slides.
- Black Monday:
There’s nothing like a financial crisis and an unforeseen stock market drop on Monday. Automatic stop-loss orders and financial contagion on October 19, 1987, which historians now refer to as Black Monday, offered the economy a comprehensive routing as a domino effect echoed worldwide.
September: the real culprit?
Strangely enough, there are more historical downward markets in September, not October. More specifically, in September or earlier, the catalysts that set off both the crash of 1929 and the panic of 1907 occurred, and the reaction was merely postponed.
Taken as a whole, as you can see from the number of “Black Days” occurring in the month, an excellent argument can be made that September is worse for the markets than October.
- The Original “Black Day”:
September 24, 1869, the initial Black Friday was anything but joyful. The price of gold continued to grow until the Treasury broke the corner by selling $4 million in government gold, lowering the price of gold by $25 in a single day. It leads to sparking a devastating crash and ruining many investors
- Black Wednesday:
In September 2001 and 2008, the Dow’s single-day point decreases were more outstanding than Black Monday 1987, the former due to the World Trade Center attacks and the latter due to the subprime mortgage collapse.
A blessing in disguise:
Surprisingly, the culmination of more bear markets than the beginning has traditionally been heralded by October. The fact that it is perceived negatively may make it one of the better buying possibilities for opponents. In October, slides turned around in 1987, 1990, 2001, and 2002 and started long-term rallies. Black Monday 1987 was one of the significant purchasing opportunities for the last 50 years.
October gets a bad rap, mostly because so many black days fall in this month. This is a psychological influence in October rather than something to blame. Most investors have encountered more bad Septembers than Octobers.