Timely and Relevant News: Could There Be An October Crash?

As Mark Twain once said, “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.”

October has long been a source of anxiety for stock investors. “October is known for some spectacular crashes and many expect bad things to happen again this year. 1929, 1987, and 2008 all come to mind when we think about this month,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The truth is this month is simply misunderstood, as historically it is about an average month.”

October is known for volatility. No month has seen more 1% moves (up or down) than October, with some of the largest 1-day moves (both up and down) taking place this month. The S&P 500 hasn’t had a 5% pullback all year (the average year sees about three) and the last one was nearly a full year ago, one of the longest such streaks ever. Not to mention the S&P 500 has now gone an incredible 317 trading days in a row above its 200-day moving average - one of the longest streaks ever.

What we are getting at is a 5-7% pullback could potentially come at any time given we haven’t had one in so long. A pickup in volatility would be normal at this stage of a strong bull market. We think suitable investors may want to consider "buy the dip" opportunities as they arise. It is important to not lose sight of your long-term goals as volatility occurs and to maintain your perspective in the midst of market ups and downs. 

Here are some other interesting statistics to think about regarding the S&P 500 in October.
  • It has been 21 years (2000) since October didn’t close at least up or down 1%. Several percent moves up or down are quite common for this month in other words.
  • For six years in a row October has alternated between higher and lower. Given 2020 it was in the red, it could be time for a bounce in 2021.
  • The last two times the S&P 500 was up more than 15% year-to-date heading into October, stocks gained each time (2013 and 2019).
If you have specific questions related to your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss further. 


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

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All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.