Why stocks are likely to be especially volatile this October

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October far and away is the most volatile month of the year for the U.S. market.

September has the reputation of being the worst month for the stock market, but October far and away is the most volatile month of the year — as you can see from the accompanying chart. So if this October follows the historical averages, the stock market won’t lose as much as it has so far in September but investors will still feel whipped around.

Why would October be the most volatile month? I’m not aware of any plausible theory, and that normally would be a reason not to expect the historical pattern to continue. But not in this case. If so, our job is not to get spooked by October’s volatility into going to cash. Of course, you may have other reasons why you might want to reduce your equity exposure. But if you were otherwise wanting to be heavily invested in equities, fasten your seat belt and hold on.

 

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