October has a way of making investors nervous. And for good reason.
The largest percentage drop in the Dow Jones Industrial Average came on October 19, 1987. It crashed by more than 22 percent on so-called Black Monday as traders engaged in panic selling.
On that day in eighteen other major world markets, the index decline exceeded 20 percent. The worst fall, 45.8 percent, occurred in Hong Kong.
The third- and fourth-largest percentage collapses in the Dow also occurred in October—both times in 1929—preceding the Great Depression of the 1930s. (The Dow currently refers to a basket of 30 American companies in a range of industries.)
And the 10th and 11th-largest percentage drops happened on October 26, 1987, and on October 15, 2008. The latter came in the midst of a global economic meltdown that preceded the Great Recession.
A six-week Bankers' Panic of 1907 also started in October. That followed a 50 percent fall in share prices from the previous year on the New York Stock Exchange. Depositors withdrew their money from banks, triggering the collapse of some financial institutions, including the Knickerbocker Trust Company.
But even though the worst single-day market tar and featherings have occurred in October, the worst year for stocks, on average, has been September.
According to Investopedia director of trading and investing content James Chen, it's the only month that's shown a negative return over the last century.
"However, the effect is not overwhelming and, more importantly, is not predictive in any useful sense," Chen wrote last year. "If an individual had bet against September over the last 100 years, that individual would have made an overall profit. If the investor had made that bet only in 2014, that investor would have lost money."
This month, as of the close on September 25, the Dow fell 4.45 percent. The more tech-heavy NASDAQ Composite Index declined by 7.91 percent over the same period.
There's always a chance of another massive October decline in the markets in advance of the November 3 U.S. presidential election. Some are even wondering whether Donald Trump will refuse to leave office even if he loses.
Then there’s the deteriorating situation with COVID-19 coinciding with fall flu season.
Will Donald Trump refuse to leave office even if he appears to have lost the election?
Then there's the deteriorating situation with COVID-19. As K-12 students have returned to school in many countries, the case loads are increasing.
Optimism hasn't vanished
However, not everyone believes the end is nigh for investors.
Simon Fraser University macroeconomist Lucas Herrenbrueck, for example, thinks that physical distancing and less international travel is leading people with regular incomes to turn more attention to their investments.
“To put it simply, the pandemic has increased demand for saving instruments, including stocks and bonds, while at the same time reduced our opportunities to spend on other things," Herrenbrueck said in a recent SFU news release. "This combination is contributing to higher asset prices despite poor economic conditions.”
Of course, predicting the direction of markets is tougher than overcooked brisket, particularly over the short term.
But billionaire investor Warren Buffett has had considerable success over the long term.
"I will tell you how to become rich," the Sage of Omaha once advised. "Close the doors, be fearful when others are greedy. Be greedy when others are fearful."More