Seasonal Patterns Show Reduced Likelihood for a Negative October Effect on Stocks

The October Effect has a reputation for making some investors nervous; however, based on seasonal statistics, we believe stocks are more likely to move higher in October rather than lower.

The October Effect reminds investors that two out of three historical Black Monday stock market crashes occurred during this Halloween month. The first Black Monday took place on October 28, 1929—and the great depression followed shortly thereafter. The second occurred on October 19, 1987, when the S&P 500 Index fell approximately 20.5 %.

Our latest analysis identified four sectors that showed a seasonal tendency to outperform the S&P 500 during October over the last 20 years—a month when the index has on average moved higher by 1.9%, generating positive returns 65% of the time. As we review the data, it’s important to note that non-seasonal factors still influence performance and should not be ignored.

The table below highlights sectors’ average over- and under-performance versus the S&P 500 during October since 1997, as well as the top-performing industry groups over the same time period:

Looking at the table above, the information technology, consumer staples, consumer discretionary, and financials sectors have on average tended to exhibit the highest relative strength versus the index in October over the past 20 years. This increases the likelihood that the upward trajectory may continue. But, if you are looking for a more targeted strategy, a potential shining star within the seasonally weak industrial sector may be the transportation industry group.

Even though the month of October generally involves being surrounded by scary things, it does not necessarily mean that it has to be frightening for equity investors.  Seasonal statistics suggest that equities are likely to continue higher this month—and it could be a good time to consider implementing seasonal analysis as part of your portfolio management plan.


Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

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