Good News or Ironic?


Well, there ya go.  We made it through October without a serious stock market crash.

That’s good because October has secured a reputation as a bad month for US stocks.

It has a black mark.  It’s the only month since 1950, that has twice had double digit declines.  The Dow dropped 21.67% in October 1987 and 16.79% in October 2008. Plus of course the worst stock crash of all began in October 1929.

In other words October is a scary month because investors are more likely to stampede with a sudden double digit downturn.

It’s the stampede that creates the serious cataclysmic drop.

In terms of average return, October is not a bad month.  It’s tied for the sixth best.

stockchimp

February is the month to be wary according to statistics from Moneychimp.com (1) 

Here are some statistics about  the Dow Jones Industrial Average average return by month since 1950.

 Month                          Up Years   Down Years   Average Return   # of double digit downs

November                          44                   23                     1.38%                              0
December                          50                   17                      1.54%                               0
January                              39                   29                     0.76%                               0
February                            38                   29                   – 0.05%                               1
March                                 43                   24                      1.14%                                1
April                                    46                   21                      1.34%                                0
May                                     39                   28                     0.15%                                 0
June                                    34                   33                    – 0.09%                               0
July                                     37                   30                       0.88%                               0
August                                37                   30                    – 0.27%                                1
September                         29                   38                    – 0.67%                                 1
October                             41                   26                       0.76%                                2

September is the worst month for returns in the US stock market, followed by August, June and February.

The good news.

November and December are the two best months of the year for the US stock market.

If this type of stock history is of any value, then we should not expect and serious retraction in the stock market until at least February.

Ironic.

Beware because markets are full of irony!

Won’t it be if a share crash comes along during these next best two months?

The Reality.

We won’t know till we know.  So we should always protect our investments.

There is three realities we can derive from these statistics.

#1:   Since 1950 the Dow Jones Average has risen an average of  6.87% per annum.

#2:   Since late 2008, the Dow Jones Average has risen almost 172% or 21.5% per annum.

#3:  Periods of high performance are followed by periods of low performance and vice versa.

Gary

(1)  www.moneychimp.com/features/monthly_returns.htm

 


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