Anyone who follows the mainstream financial press is seeing an increasing number of articles about bear market risk. Today’s Bloomberg guest piece by Barry Ritholtz is a classic example: Signs of a Bull Market Turning Bear.
The growth in investor anxiety is happening in October, historically the most volatile month for market performance. I took a few minutes to update a couple of charts to illustrate October volatility using the Dow and starting in 1900. So we can see 114 October gains and losses.
Here is a look at the data in a chronological sequence.
Here are the same percentages sorted from low to high.
As we can see, the Dow October average over this timeframe is a modest 0.20%. There have been 64 monthly gains and 49 monthly losses. That’s calculates as a gain about 57% of the time. Note that the outbreak of WWW I in 1914 prompted the closure of US markets from July 31 to November 28.
But the range is truly remarkable, from the 10.65% surge in 1982 to the -23.22% rout in 1987, which included the -22.61% cliff-dive on October 19th, known as Black Monday.
As I type this, the October Dow is down 1.67%, the S&P 500 is down 1.77% and the Russell 2000 is down 2.68%.
Time will tell!
Images: Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool