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What to Expect for Stocks in October


Should investors fear the month ahead?

For all the tough talk heading into the month, September didn't prove so scary after all.

Stock pickers can't be blamed for thinking these past few weeks were going to scratch up their portfolios. After all, historically, the market does pretty poorly as fall kicks off. The average price change for September, going back to 1929, is a decline of 1.2%. The market has typically fallen 56% of the time in September.

However, through Tuesday's close, the S&P 500 was up 3.9% for the month. For the quarter, we're up 15.4%.

Let's put that in historical perspective, friends: That's the 17th best gain of all quarters since 1929, and 5th best of all third quarters.

Sam Stovall, for one, isn't surprised. The chief investment strategist at Standard & Poor's told clients heading into the month that he was looking for a positive September.

"I can understand why people were worried because historically September is a bad month," Stovall tells Minyanville. "But, in the Septembers following the end of bear markets, the market does very well."

Stovall notes that, on average, September has risen 1.8% in the 14 times following the end of bear markets since 1932.

Now, more importantly, what can investors expect in the month ahead?

If history is any kind of guide, we can expect a V-shaped month, strategists say: We'll come in, drop, but close higher.

However, even dedicated bulls are on the lookout, concerned about how the market will react to any kind of third-quarter earnings disappointments.

October comes with a horrible history of market trivia: The "Great Crash" in 1929 hit during the month of October. So did the "Crash of '87." Last year, the month of October was again particularly memorable for all the wrong reasons -- the S&P 500 fell 16.9% in just 30 days, and that was on top of a 9.1% decline in September.

But, historically speaking at least, October isn't usually all that dramatic. In fact, as Stovall says, it's a pretty "blah" month.

Since 1932, the S&P has just eked out a positive advance: up 0.2% on average.
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