Love, Hate October

Monday, October 23, 2017

Sheila Jamison and Rich Jamison

October has long engendered a "love, hate" relationship with investors. Some of the more notorious market meltdowns have occurred, or at least have escalated, in October; including 1978 (-9%), 1987 (-22%) and 2008 (-17%). Still, since 1950, the S&P 500 Index (SPX) has seen more double-digit October gains than double-digit October losses.

October is commonly called “the bear killer.” The month’s end begins the seasonally strong six-months of the calendar year.

Happily, we sometimes get an early start on the strong season. The S&P 500 index has gained almost 2% through today (Wednesday, October 18th) since the month began. While many people express surprise at this gain, historically speaking, October is a positive month for the market more often than it is negative. SPX has logged gains in 60% of the Octobers between 1950 and 2016. The average return for the month during this time frame is +0.89%. Reviewing the ten most recent Octobers, seven have been positive, with an average gain of 4.66% … including October 2008, the heart of the financial crisis!


This October has proven to offer some of the more meaningful buying opportunities within the current long-term bull market including 2011 and, more recently, 2015, when the S&P 500 rallied over 8% during the month. This year, October comes after a record-breaking year for equities, with the SPX moving consistently into uncharted territory and carrying a gain of about 12% YTD.

Another interesting observation is that returns of over 5% occurred in 17% of Octobers going back to 1950 while only 6% have seen declines in excess of -5%. The figure below helps see this, showing not only that there have been more up Octobers than down Octobers, but also the degree to which they have been either up or down.


Historically, the month has both started and ended well, with the last four sessions on the month producing gains more times than not. Everything in between has tended to produce a very different experience, with more substantial moves in both directions.

As we work our way through this month, our approach is both positive and careful. US Equities remains the strongest asset class technically, yet we have seen indications of other classes gaining strength.

Lastly, earnings season is once again upon us, which often portends above-average daily volatility. Given that recent volatility has been running at/near record lows, “above-average” is a low bar. With all of that in mind, we proceed with caution, making sure to monitor positions closely and taking note of further signs as they occur.

Any questions – give us a call to discuss.

Data from Finance.Yahoo.com and dorseywright.com, October 18, 2017.
Charts courtesy of Dorsey Wright Associates, September 28, 2017.

The data above were taken from sources deemed reliable. However, no guarantee can be made as to their completeness and accuracy.
Nothing in the above is meant to be, nor should it be construed as, investment advice or recommendations to buy or sell any security. Individual securities, whenever mentioned, are for illustrative purposes only and may not be relied upon as investment advice.
All indices are unmanaged and are not illustrative of any particular investment. A direct investment cannot be made in any index.
Tax and/or legal information contained herein is general in nature and for informational purposes only. It should not be relied upon as advice. Consult your tax professional or attorney regarding your unique situation.
Past performance is no guarantee of future results.

© 2017 Jamison Financial Group. Please feel free to distribute copies to individuals you feel may benefit from the information.