Historically, that agitation — perhaps linked to the reduced daylight that triggers mood swings in many people — has contributed to making October the most volatile of all months in the stock market. According to Advisor Perspectives, five of the 10 major market bottoms since 1950 occurred in October, and that list doesn’t include the aftermath of the October 1987 crash, which produced a short-lived bear market that ended two months later. Conversely, only one of the 10 major market tops since 1950 happened in October.
This is to provide fair warning that, for reasons not necessarily related to macro-economic fundamentals, you might find yourself inclined to act more hastily as the sun dips ever earlier over the horizon. That circadian-based tendency might be especially pronounced this October, given that stock prices are elevated (though not necessarily frothy) at a time when investors could be wondering whether the foundation for the post-election leg of the bull market — expectations for big corporate tax cuts and massive infrastructure spending — will ever happen.
As always, market pundits will have plenty to say on the matter. And as always, it’s probably best to consider prognostications about something as intricate as a $78 trillion global economy as little more than entertainment.
“Most successful pundits are selected for being opinionated, because it’s interesting, and the penalties for incorrect predictions are negligible,” observed Princeton University professor Daniel Kahneman, winner of the 2002 Nobel Prize in Economic Sciences.
“You can make predictions, and a year later people won’t remember them.”