Sorry!! The article you are trying to read is not available now.

What Happens in the Octobers Following Strong Septembers?

Print comment Post Comments
The history of Octobers is a warm and fuzzy one for stock pickers.As the final bell sounded in September, bears finally had to admit they got beat: the S&P 500 closed the month with a 9% gain.

What does history suggest about the month ahead?

S&P’s Sam Stovall spun his spreadsheet for answers. He notes that there have been six times since 1928 that the S&P 500 gained 5% or more in September. The average price change for the “500” one month later was a rise of 0.7%. Yet the frequency of a price gain in this subsequent October was equal to a coin-toss at only 50%.

More generally, though, October has historically proven a kind one for stock pickers. In fact, the average price change for the S&P 500 in October since 1945 has been better that that for the average of all 12 months.

One reason for this, says Stovall, is because October is traditionally a “bottoming month,” as five of the last 10 bear markets ended in October: 1957, 1966, 1974, 1990, and 2002. These market bottoms have historically set us up for better times to come, he notes.

Indeed, the S&P 500 recorded its best results in the fourth quarter of all years since 1945, rising an average 3.6% versus 1.9%, 1.9% and 0.7% for the first, second and third quarters, respectively. Also, the S&P 500 rose in 77% of fourth quarters since WWII, versus 59%, 62% and 57% for the first through third quarters of all years, respectively.

Observed from a different perspective, Stovall says, the three best quarters of the 16-quarter presidential cycle are those just ahead in which the S&P 500 rose from 5.3% to 7.1% on average, and recorded price increases more than 80% of the time.

Of course, as we just witnessed with a largely unexpected bounce in September, past performance doesn’t guarantee future results. History can serve as a helpful guide, but driving while gazing strictly through the rear-view mirror is a sure-fire way to crash the family car.
POSITION:  No positions in stocks mentioned.