Spooky October begins often rewarding 4th quarter

By Dian Vujovich

In addition to the ghouls, ghosts and goblins that Halloween brings with it, the stock markets performance during this month has— every now and then– been just as frightening. But not to worry: So what if October is best known for its market crashes. This 10th month of the year also marks the beginning of the fourth quarter—a quarter that history has shown can be very rewarding.

Before going there, there is no dismissing the market’s performances on Black Tuesday, Oct. 29, 1929; Black Monday, October 19, 1987 when the DJIA fell more than 20 percent; or, how the Dow dropped roughly 14 percent during October 2008.

That noted, the markets have also recovered and turned all of those scary financial times into financially rewarding ones. Our markets have a history of doing that given time.

As for performance, since 1928 the S&P 500 has been up 50 times in October, and down 36 times, according to a recent SeekingAlpha.com piece by Chris Kimble.

Quarterly returns have been up an average of 2.6 percent since 1928, according to Jack a. Albin, chief investment officer at BMO Private Bank. “ The fourth quarter has historically been a good time to own stocks, “ he wrote in an October 3, 2014, Outlook for Financial Markets report.

A longer view of how the market has preformed in October reveals another look, however. Namely that it kicks off a season in which rallies have proved profitable.

From Eric Parnell’s piece, “ Stocks: The Hunt for Red October”, at  SeekingAlpha.com:” How stocks have performed in October has proven critically important in setting the course for the market for the remainder of the year. Unlike October, the months of November and December rank among the best months of the year in terms of winning percentage and total returns. This has been particularly true since World War II, as stocks have risen 61% of the time in November and a more remarkable 72% of the time in December….”

Then again, no  matter what history reflects, it’s the current market that matters most.

With interest rates low and equities considered the only game in town because of that, the overall economy— while improving–has yet to be as hot as equities have been.

If quarterly mutual fund returns offer any kind of future guidance, a cautious outlook for the remainder of 2014 might be worth considering: At the end of third-quarter equity funds posted their first quarterly loss in nine quarters, according to Lipperweb.com. Equity funds, on average, were down nearly 3 percent.

Then again, it’s the market. That incredible, mystifying and sometimes even spooky spot where money is made and lost every day of the trading year.