October Fears: Fact or Fiction?

10/10/2003 12:00 am EST


Mark Twain once said, " October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February." Yet, October remains the most feared of months. Is this warranted? Several leading advisors examine the facts. (For more information on the advisors cited below, simply click on their photos.)

Stack, James"October, is known for stock market crashes," says Jim Stack, editor of InvesTech Market Analyst." First there was 1929, then 1987. And in between, the Octobers of 1930, 1932, and 1938 all experienced double-digit losses in the Dow - qualifying them to be among the 30 worst months of the past 75 years. There were also the back-to-back October Massacres of 1978 and '79, which saw declines of 8.5% and 7.2%, respectively. We think you should calm your nerves about the Halloween goblins and spooks of October. Actually, of all months, September has the worst record. We don't want to downplay or overlook the problems with this market, as valuations are historically high. But interest rates are at 40-year lows and low interest rates will support higher stock valuations. For now, the bull deserves every benefit of doubt."

Carlson, Charles"October gets a bad rap," says Charles Carlson, editor of The DRIP Investor.  "Indeed, 'October-phobia' is a common ailment with investors this time of year. The reason is that the month of October has seen some of the largest market declines in history. Actually, however, October has not been nearly as bad for investors as commonly believed. Indeed, historically, the month of October has seen more gains than losses. Furthermore, the month of October has seen market gains every year since 1998. The bottom line: Don't fear October, especially this year. With corporate earnings improving, investors should see decent gains."

Alexander, Gary"It's no secret that October has a tainted past," says Gary Alexander, editor of the exciting, newly-launched SmartMoney Investor's Digest.  "The Panic of 1837 began in October, as did the Panic of 1907. The Panic of 1929 began on October 24. The 'Sputnik Crash' came in October 1957, and the Panic of 1973 began in October and launched a 12-month, 35% decline. And the crash of 1987 began on October 16. Despite these events, it's time to put October fears to rest. October is best viewed as the end of bear markets, not the start of new trouble. Most of the bear markets since 1950 ended in October, and the following year was uniformly positive: In fact, eight of the last 12 bear markets ended in October. October marked the end of the Asian Currency Crisis in 1997, the culmination of the Long-Term Capital Management liquidity crisis in 1998, and the bottom of the long bear market of 2000-02. So October's glass is half full and rising, not half empty."

Rowe, Donald"The month of October has a bad reputation as the month of panics and crashes," says Donald Rowe, editor of The Wall Street Digest: "However, the market usually bottoms by mid-October and then moves up relentlessly right through November, December, and January, the three best months of the year. As a result, October is the ideal time to become fully invested."

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