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October can be Bad Month for Stock Market

Three Major Melt Downs Happened in October


October is not a good month historically for stocks and the stock market.

Actually, most Octobers are not much different from other months. They stand out because most companies begin their fourth quarter in October.

For retailers and other companies with ties to the holiday shopping season, October is the beginning of the most intense and important shopping season.

However, this article is about three Octobers in particular that live in stock market history.

It can be said that the stock market crashed three times and each of those disasters happened in October.

First Stock Market Crash

The first crash was the beginning of the great market implosion that helped usher in the Great Depression.

On Oct. 29, 1929, the Dow plunged 12.8 percent, which is substantial. However, it didn’t stop there.

The market kept dropping and eventually lost approximately 90 percent of its value.

In many ways, the crash of Oct. 19, 1987 was much worse. The Dow lost 22.6 percent of its value in one day.

The slide continued for several weeks adding to the losses, before the market found a bottom that would hold.

Because the markets are much larger now than they were in 1929, the dollar volume lost was much higher.

Stock Market Loses

It is estimated that the stock market lost a $1 trillion in value over the few weeks that followed Oct. 19, 1987.

The stock exchanges have instituted safe guards to help prevent or at least slow down markets in free fall.

When the market registers certain percentage losses during a trading session, the exchanges will halt trading.

Depending on the severity of the losses, the halts may be for an hour or more, or, in extreme cases, for the rest of the day.

The Third Melt Down

October of 2008 joins the infamous list of market melt downs. The problems started months before, but October was the worse month in a string of bad ones.

The S&P 500 was down by more than 27 percent at one point in the month.

It is important to focus on the percentage changes when listening to stock reports. You get a better idea of the magnitude of the change in closing prices with percentages.

Stock Market Percentages

Because of the difference in sizes of the three major indexes (the Dow, the S&P 500 and the Nasdaq), comparing readings is meaningless.

Most investors are glad when October is over, although that may just be an emotional response.

Clearly, these three melt downs inflicted significant damage. However, the 1987 crash provided a unique buying opportunity.

If the markets can absorb a huge retraction and foresee better economic times coming, investors can turn a disaster into a bargain-shopping spree.

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