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Q3 2019: October… The “Jinx Month”… Or Maybe Not

The tenth month of the calendar year brings lots of change for all of us. Temperatures begin to drop (more so for some than others), it gets darker earlier and earlier (proof by me getting quizzed by my kids nightly on the topic… as I put them to bed, earlier and earlier), and you can generally feel a change in the air as we all begin to anticipate the upcoming holidays. It is such a great time of year, right? Not according to the main stream financial media who has coined October as the “Jinx Month” for the stock market!?! But, is there any truth to this? Only if you read half the story!

On the surface, October should be called worse than the Jinx Month. Historically, more than half of the top ten worst days for the S&P 500 Index have reared their ugly head in October. In fact, the worst day ever, known as Black Monday transpired on October 19, 1987… the S&P 500 Index closing 20.47% lower than it opened on that fine autumn day. That day along with a handful of others surely warrant a harsher moniker than Jinx Month.

In addition to these one-day phenomenon’s, October is by far the most volatile month for the stock market. Of the total 1%+ daily declines of the S&P 500 Index since 1950, more than 10% of them have occurred in October… far and away the highest percentage for any month. Further evidence that there may be more to be scared of in October then just Halloween. I mean, no one likes to see their investments dramatically rise and fall… right? Well, not so fast. Apparently not everyone gets spooked by this volatility.

This is where the story of Jinx Month takes a turn… a U-turn in fact. The chart to the right demonstrates that over the past two decades October actually has the best average monthly return (2.49%). Going further back (50 years) it doesn’t hold the top spot, but still ranks in the top 4 months for average returns. Not too bad for the Jinx Month. But how can this be when October is home to the one-day collapses and is so volatile?!?!

Our two decades of investment experience tells us October is just a microcosm of what we see on an annual basis. But more like on steroids due to where this month lands on the calendar. There are so many market participants who buy and sell stocks throughout the year and when it comes to October these “investors” choose to sell (and sell a lot) at any hint of uncertainty. Maybe they are trying to preserve gains from the prior nine months. Maybe they need their money for Christmas gifts. Whatever the reason, we just say “thank you” to these sellers.

You see, as the sellers sell, the buyers come in and buy (and buy a lot)… many times at a discount (due to the excessive selling). Ultimately (as the data reflects), the buyers take over and stock prices begin their ascent driving the October gains and typically through the remainder of the year. Needless to say, the holiday season brings great cheer to investors who can see beyond one year (or even one month). A long story short… October is definitely not a jinx to long-term investors! It is more like an early Christmas present!


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