Seasonally Speaking, October is the time to buy stocks,
especially late October and especially tech stocks and small caps. October can
evoke fear on Wall Street as memories are stirred of crashes and massacres. We use
the term “Octoberphobia” to describe the phenomenon of major market drops
occurring during the month. Market calamities can become a self-fulfilling
prophecy, so stay on the lookout.
October has been a turnaround month—a “bear killer” if you
will, turning the tide in thirteen post-WWII bear markets: 1946, 1957, 1960,
1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002, 2011 (S&P 500 declined
19.4%), and 2022.
DJIA was first to bottom in 2022 on the last day of
September. S&P 500 ended its bear market on October 12 while NASDAQ did not
reach a final closing low until December 28. Eight of these were midterm years.
While not in an official bear market this year, the market is suffering through
typical seasonal weakness which could once again come to an end in October.
Pre-election year Octobers are ranked second from last for
DJIA, S&P 500 and NASDAQ while Russell 2000 is dead last with an average
loss of 1.5%. Eliminating gruesome 1987 from the calculation provides only a
moderate amount of relief. Should current weakness persist into October it is
likely to provide an excellent buying opportunity, especially for depressed
technology and small-cap shares.
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