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Is October the Most Volatile Month for the S&P 500 Index?

  • Historically, October has been the month showing the largest percent change, boasting both Black Monday 1987 and 1929, as well as 3 of the 10 largest moves since 1987.
  • While many of these moves have been breakdowns, some call them crashes, the seasonal  tendency the past 30 years has been for the S&P to trend higher from early October through the end of the year.
  • As for October itself, the average gain is 1% to 3% over the past 30 years.
  • October has long been known for three things: Pumpkins (and by default everything flavored as “pumpkin spice”), the US Thanksgiving holiday (still my favorite of the year), and volatility in US stock indexes. In fact, it was the events surround Black Monday 1987 that changed my life, setting my career on a course to understanding what makes markets move, leaving the why to be figured out later[i]. Thirty-six years later it is still a work in progress.

    The subject came up again this past weekend on the X-site once known as Twitter[ii]. MarketWatch posted a piece talking about October’s volatility this past Saturday. After I commented on it the question came in asking, “More volatile than September?” This was followed by another query regarding my thoughts on a stock market crash this month. Historically, this is the month for the S&P 500 Index ($INX) to make a big move with 3 of the top-10 all-time largest changes (by percent) being registered back in 2011 (up 11%), 2008 (down 17%), and the one back in 1987 (down 22%) that started it all[iii] (at least for me). 


    If we break the 30-year timeframe from October 1987 through October 2016[iv] we see October showed the largest percent change, an average of 4.3%. This was followed by September at 3.9%, and November at 3.8%. I find this interesting in that it is the three fall (September, October, and November) that lead on the scale of percent of monthly change, not an actual financial quarter (Q3 = July/August/September, Q4 = October/November/December). As one might expect, the percent changed dropped off sharply for December, coming in at 2.7%. 


    As for the actual seasonality of the S&P 500, the study I’ve put together based on weekly closes only show the 5-year seasonal index (red line), 10-year index (blue line), 20-year index (purple line), and 30-year index (gray line) all tend to post a low weekly close the last week of September. From there the average moves are: 

    • 5-year index shows a gain of 6% through late November
    • 10-year index shows a 6% gain through the first weekly close of December
    • 20-year index shows a gain of 5% through the last weekly close of December
    • 30-year index shows a 4% gain through the first week of November

    Given these average moves, again all based on weekly closes, and the S&P 500 closing September 2023 (green line) at 4,288.05, our seasonal high weekly close targets become: 

    • 5-year = 4,651
    • 10-year = 4,651
    • 20-year = 4,502
    • 30-year = 4,460

    But what about October itself? Yes, a selloff is certainly possible, as history has shown, but if we see normal seasonal tendencies play out this is what we could expect: 

    • 5-year tends to gain 3%, putting the target for the high weekly close for the month near 4,415
    • 10-year also tends to gain 3%, making the high weekly close target the same at 4,415
    • 20-year tends to gain 2%, with a high weekly close target for the month near 4,375
    • 30-year tends to gain 1%, putting the high weekly close target for the month near 4,330

    Technically the S&P 500 index remains in a major (long-term) uptrend, though has closed lower 2 consecutive months. Again, this is a seasonal move, from the normal high the second weekly close of August through the last weekly close of September, but leaves the door open to a possible Benjamin Franklin Fish Similarity[v].


    One final note in response to the obvious question of if the previous 7 years have actually changed anything. My son has been working on the seasonality for the CBOE Volatility Index ($VIX), “a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index”[i]. The VIX now shows a spike in the 10-to-15-week (of the year) timeframe, a change heavily influenced by the global shutdown in March 2020 due to the pandemic. The secondary volatility peak then occurs around Week 40, or roughly the first week of October before cooling off through the end of the year.  

    [i] Definition from Investopedia.com.

    [i] Thus was sowed the seeds of Newsom’s Rule #5: It’s the what, not the why. 

    [ii] Wouldn’t it be fun if the artist formerly known as Prince, who adopted a symbol as his official name, was still alive to be the spokesman for the social media site in question? 

    [iii] Of course, we can go back to October 28, 1929, another Black Monday when the Dow Jones Industrial Average lost 13%, officially ending the Roaring 20s and ushering in the Great Depression. 

    [iv] For my seasonal analysis, I cut off the S&P 500 just before the 2016 US Presidential Election. Starting in November 2017, market chaos was ramped up to unmanageable levels through the use of media, both mainstream and social. This was followed by the Black Swan event of a global pandemic and Russia’s invasion of Ukraine. Since so many of the players are tied together and still running around creating havoc, I will leave the cutoff point at October 2016 for the foreseeable future. 

    [v] The Benjamin Franklin Fish Similarity tells us, “Like guests and fish, markets start to stink after three months (days, weeks, whatever time frame is being studied) of moving against the trend”. 

    More Stock Market News from Barchart

    On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

    The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

    Summarize this content to 100 words
    Historically, October has been the month showing the largest percent change, boasting both Black Monday 1987 and 1929, as well as 3 of the 10 largest moves since 1987.
    While many of these moves have been breakdowns, some call them crashes, the seasonal  tendency the past 30 years has been for the S&P to trend higher from early October through the end of the year.
    As for October itself, the average gain is 1% to 3% over the past 30 years.
    October has long been known for three things: Pumpkins (and by default everything flavored as “pumpkin spice”), the US Thanksgiving holiday (still my favorite of the year), and volatility in US stock indexes. In fact, it was the events surround Black Monday 1987 that changed my life, setting my career on a course to understanding what makes markets move, leaving the why to be figured out later[i]. Thirty-six years later it is still a work in progress.

    The subject came up again this past weekend on the X-site once known as Twitter[ii]. MarketWatch posted a piece talking about October’s volatility this past Saturday. After I commented on it the question came in asking, “More volatile than September?” This was followed by another query regarding my thoughts on a stock market crash this month. Historically, this is the month for the S&P 500 Index ($INX) to make a big move with 3 of the top-10 all-time largest changes (by percent) being registered back in 2011 (up 11%), 2008 (down 17%), and the one back in 1987 (down 22%) that started it all[iii] (at least for me). 

    If we break the 30-year timeframe from October 1987 through October 2016[iv] we see October showed the largest percent change, an average of 4.3%. This was followed by September at 3.9%, and November at 3.8%. I find this interesting in that it is the three fall (September, October, and November) that lead on the scale of percent of monthly change, not an actual financial quarter (Q3 = July/August/September, Q4 = October/November/December). As one might expect, the percent changed dropped off sharply for December, coming in at 2.7%. 

    As for the actual seasonality of the S&P 500, the study I’ve put together based on weekly closes only show the 5-year seasonal index (red line), 10-year index (blue line), 20-year index (purple line), and 30-year index (gray line) all tend to post a low weekly close the last week of September. From there the average moves are: 
    5-year index shows a gain of 6% through late November
    10-year index shows a 6% gain through the first weekly close of December
    20-year index shows a gain of 5% through the last weekly close of December
    30-year index shows a 4% gain through the first week of November
    Given these average moves, again all based on weekly closes, and the S&P 500 closing September 2023 (green line) at 4,288.05, our seasonal high weekly close targets become: 
    5-year = 4,651
    10-year = 4,651
    20-year = 4,502
    30-year = 4,460
    But what about October itself? Yes, a selloff is certainly possible, as history has shown, but if we see normal seasonal tendencies play out this is what we could expect: 
    5-year tends to gain 3%, putting the target for the high weekly close for the month near 4,415
    10-year also tends to gain 3%, making the high weekly close target the same at 4,415
    20-year tends to gain 2%, with a high weekly close target for the month near 4,375
    30-year tends to gain 1%, putting the high weekly close target for the month near 4,330
    Technically the S&P 500 index remains in a major (long-term) uptrend, though has closed lower 2 consecutive months. Again, this is a seasonal move, from the normal high the second weekly close of August through the last weekly close of September, but leaves the door open to a possible Benjamin Franklin Fish Similarity[v].

    One final note in response to the obvious question of if the previous 7 years have actually changed anything. My son has been working on the seasonality for the CBOE Volatility Index ($VIX), “a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index”[i]. The VIX now shows a spike in the 10-to-15-week (of the year) timeframe, a change heavily influenced by the global shutdown in March 2020 due to the pandemic. The secondary volatility peak then occurs around Week 40, or roughly the first week of October before cooling off through the end of the year.  [i] Definition from Investopedia.com.[i] Thus was sowed the seeds of Newsom’s Rule #5: It’s the what, not the why. [ii] Wouldn’t it be fun if the artist formerly known as Prince, who adopted a symbol as his official name, was still alive to be the spokesman for the social media site in question? [iii] Of course, we can go back to October 28, 1929, another Black Monday when the Dow Jones Industrial Average lost 13%, officially ending the Roaring 20s and ushering in the Great Depression. [iv] For my seasonal analysis, I cut off the S&P 500 just before the 2016 US Presidential Election. Starting in November 2017, market chaos was ramped up to unmanageable levels through the use of media, both mainstream and social. This was followed by the Black Swan event of a global pandemic and Russia’s invasion of Ukraine. Since so many of the players are tied together and still running around creating havoc, I will leave the cutoff point at October 2016 for the foreseeable future. 

    [v] The Benjamin Franklin Fish Similarity tells us, “Like guests and fish, markets start to stink after three months (days, weeks, whatever time frame is being studied) of moving against the trend”. 
    More Stock Market News from BarchartOn the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
    https://www.nasdaq.com/articles/is-october-the-most-volatile-month-for-the-sp-500-index Is October the Most Volatile Month for the S&P 500 Index?

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