Most analysts believe that the bull market, which started after the markets bottomed in March 2009, is in dying days. And yet, September was a big surprise for Wall Street. That’s because it is historically the worst month for stocks; instead, the markets were surprisingly resilient. Was that the calm before the storm? In addition to October typically being the most volatile month of the year, there are more headwinds than catalysts on Wall Street.
Could the Stock Market Begin to Stall in October?
This past September was surprisingly buoyant, with the S&P 500 rising 1.7% and the Dow Jones Industrial Average eking out a 0.004% gain. It’s not something you can retire on, but it’s certainly better than expected, especially in light of the ongoing U.S./China trade war, slowing global economy, and now, impeachment talks.
But that optimism on Wall Street will face its biggest test in October. If Bay Street and Wall Street stumble, it could suggest the long-suffering bull market is beginning to stall. According to the VIX volatility index, or fear gauge, October is the most volatile month on Wall Street.
The VIX rises, meaning investors are more fearful, when stocks fall, and it falls when stock rise, because investors are more confident. October is the month when the VIX generally peaks for the year.
Over the last 30 years, it has jumped, on average, more than 21 points. Over the same time frame, close to 200 S&P 500 companies have experienced daily moves in excess of one percent. Those kinds of moves can give investors heart palpitations. For all that stress, investors have been rewarded, since 1950 at least, with average October gains of just 0.9%.1
Then again, October is also the month when the markets crashed in 1929, 1987, and 2008. That volatility can sneak up on you too. In 2019, the broader markets were on fire, until the start of the fourth quarter, when the markets experienced a fourth quarter sell off. In October 2018 alone, U.S. stocks lost nearly $2 trillion.2
There is no immediate indication the markets will crash in October 2019, but there is a good chance it will be extremely volatile. After the September calm, investors could be jolted by weak third quarter earnings and forced to reckon with ongoing trade tensions, declining U.S. economic data, the ongoing impeachment saga in Washington, and ever-rising tensions in the Middle East.
How Can Learn-To-Trade.com Help You Profit?
The S&P 500, Dow Jones Industrial Average, NASDAQ, and Toronto Stock Exchange have been bullish in 2019. With few catalysts to drive the markets higher, that investor optimism will be tested in October. While most investors fear volatility and uncertainty, the trading experts at Learn-To-Trade.com can teach you how to profit no matter what the markets are doing.
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- Li, Y. “Don’t expect calm markets in October, historically a month for wild swings,” CNBC, September 30, 2019; https://www.cnbc.com/2019/09/30/dont-expect-calm-markets-in-october-usually-a-month-for-wild-swings.html.
- Sheetz, M. “The stock market lost nearly $2 trillion in October. Here’s what happened,” CNBC, October 31, 2018; https://www.cnbc.com/2018/10/31/the-stock-market-lost-more-than-2-trillion-in-october.html.
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