To Fear or not to Fear October

Many have undoubtedly heard the stock market saying, “Beware of October” and there are some obvious historical reasons for this.  No other month has seen the heightened volatility and panic as was experienced in October.  specifically, the crisis in 08’ and of course, the two more famous stock market crashes of 1987 & 1929. With the US stock market surpassing the record for the longest bull run in history, is it time to fear October again?

The 4^th quarter has historically been – by far, the most seasonally bullish quarter of the year and according to our work it has historically shown positive results over 75% of the time. The same also holds true for the month of October. In fact, the preponderance of evidence shows that when October is not acting dreadful, it quite favorable having only 4 “terrible” months over the last 100 years!

It would be our view that if October does not show extreme heightened volatility that investors should indeed remain long. The question is how? The markets have been on a long positive run, but it has not come without volatility and the potential for a change in direction. Market crashes are rare, but you want to utilize a tactical strategy that respects the possibility and will reduce market exposure so that you are not the victim when a potential market crisis takes place.