There’s an interesting phenomenon surrounding October as regards the stock market – it’s probably the single most feared month of the year, with the three biggest crashes all occurring (or starting) in October. Will October 2010 be another bad month?
The Great Depression was triggered by the sharp slides which happened in October 1929 (and kept going), although the biggest one day drop was that of 19th October, 1987, when the Dow lost nearly 23% in one day, and then kept dropping for some weeks until finding a new bottom, with losses of somewhere around $1 trillion. Most recently, October 2010 was seen as the worst month for the stock markets after the banking crisis came to light – and the economic repercussions are still being felt strongly in most parts of the world.
Although there was hope that economic recovery would continue throughout this year, there are growing concerns about whether this will happen, or if we will see a further drop – the infamous double-dip recession. Behind this are the questions of whether governments put too much money into trying to boost recovery too soon, or whether they haven’t put enough in for it to be effective; how and when countries are going to be able to afford to pay for the economic stimulation so far given, and how they can pay for any more if this is needed; and whether the idea of such government intervention has been effective at all, or whether the market needs to sort itself out.
I’m certainly not qualified to answer these questions. To be honest, I’m not sure that anyone really has the answers, especially given that we’ve seen fairly convincing proof that markets are far from rational as they had previously be held to be. Watching the daily rise and fall of the main indices like the Dow Jones it seems to me that the smallest piece of news is magnified in terms of its impact on the market overall, with billions of dollars being added to, or taken from, the value of companies on the strength of relatively insignificant items.
If this is the case and we go into the last quarter of the year without some strong positive news, will the markets over-react once more and lead us back into a “Black October.” What do you think?
Related articles by Zemanta
- UK could be headed for double-dip recession (newstatesman.com)
- Double Dip or Double Speak? (theglobeandmail.com)
- No defence left against double-dip, says Roubini (forexlive.com)
- Deutsche Bank: Here’s 10 Recession Signals Splashing Cold Water On Yesterday’s Euphoria (businessinsider.com)
- Chasing Value: No Double-Dip Recession (bloggingstocks.com)
- Great economic news: ‘Dow repeating Great Depression pattern’ (dvorak.org)
- Could an October Surprise Lift Stocks? (dailyfinance.com)
This is such a great resource that you are providing and you give it away for free. I enjoy seeing websites that understand the value of providing a prime resource for free. I truly loved reading your post. Thanks!
Thanks for the kind words. I’m glad you enjoyed the post – do you think we’re facing another Black October this year?
Good observations Guy. Wish I knew the answer since that would enable me to make a fortune.
Thanks, Catarina – I wish I knew the answer, too! Interested to see what people think…
Good article Guy! I simply wanted to add that October represents the start of retail-mania in the USA. Reports are coming out concerning possible price increases on certain items as well as an end to the 70% deep-discounting seen in previous years. With Black Friday not too far away, retailers are hoping for an early Christmas by offering Black Friday discounts early to online shoppers who would rather avoid the rush ‘n’ crush.
Thanks, Steve. October still looking good for the Dow, etc. 2 weeks to go – will history repeat itself?