October is coming. The most volatile month of the year for the U.S. stock market is here but if you’re prepared there’s nothing to fear. In fact, the market typically rises in October and combined with the volatility, gives investors one of the best opportunities for getting into stocks of the entire year.
You might wonder if October’s volatility is due to the two worst stock market crashes in U.S. history — 1929 and 1987 — both of which happened in October. But it’s not. October is the most volatile month of the calendar even if we don’t include those two years in the calculation. It’s actually a mystery why October historically has exhibited so much volatility. I came up empty upon inquiring of several academics as to why October should have this characteristic.
To appreciate how the combination of October’s volatility and average gain can work to your benefit, I measured the Dow’s gain from its lowest closing price during the month to its highest close over the subsequent two months. Though you’d have to be clairvoyant to fully capture this return, it’s a helpful metric with which to compare the stock market’s short-term potential.
MktwHulbert Watch it be calm this year just because!!