Is October a Bad Month for Stock Market Crashes

One of the most discussed themes in market history has to do with October specifically, that October is a month that the market crashes. October is a historically temperamental time on Wall Street and while some people believe the market is going to keep climbing higher, others are terrified it will sink like a stone.

And actually, most Octobers are not much different from other months. They just tend to stand out because most companies begin their fourth quarter in October.

There are four October implosions that remain forefront in investors’ minds, but there have also been numerous other October Market Crashes in particular that are memorable in stock market history.

The first memorable stock market crash was the beginning of the great market implosion that helped usher in the Great Depression. On Oct. 29, 1929, the Dow plunged 12.8 percent, which is substantial. However, it didn’t stop there as the stock market kept dropping and eventually lost approximately 90 percent of its value. The slide continued for several years adding to the losses, before the market found a bottom that would hold.

The second stock market crash on October 19, 1987 was much worse than the October 29, 1929 crash as the Dow lost 22.6 percent of its value in one day.

October of 2008 is the third stock market crash which joins the infamous list of stock market melt downs. The problems started months before, but October was the worse month in a string of bad ones.

The fourth October wipeout was the 550-point Dow drop in 1997.

As it turns out, October’s history is nearly the exact opposite of what most investors believe!

Since 1928, October is actually the seventh-best month to own stocks, tied with April and right in the middle of the pack, for the Dow Jones Industrial Average. For the record, September and June are the two worst months of the year on average to be invested in stocks

Instead of a month that ushers in crashes, October is actually a month that ends them. According to Stock Trader’s Almanac 2009, October has marked the end of the 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998 and 2002 bear markets.

Also looking ahead, the months of December, January and July are three of the four best months of the year to be invested in stocks (August is the other). Thus, far more often than not, October is a month to either buy or hold stocks, not sell them!