October has a notorious reputation in the world of international stock markets, and the Australian stock market is no exception. It’s often dubbed the ‘jinxed’ month for investors, with a history of erratic and sometimes large negative returns. In this article, we'll explore the historical trends of stock market returns in October in Australia and what the rest of the calendar year typically looks like for investors.
October's reputation as a poor month for stock market returns can be traced back to several significant historical events. One of the most famous is the Great Crash of 1929, which occurred on October 29th, leading to the Great Depression. Another notable event was the Black Monday crash of 1987, which happened on October 20th and saw a 25% plunge in the Australian stock market in just one day and 41% by the end of the month.
These events have left a lasting impression on investors, making October a month of caution and anxiety. However, it's essential to recognise that while October has seen its fair share of market downturns, it has also witnessed periods of growth.
The Rollercoaster Ride of October
The Australian stock market's performance in October has been far from consistent. Some years have seen substantial losses, while others have witnessed significant gains. The volatility in October can be attributed to a combination of factors, including economic data releases, corporate earnings reports and global events.
For example, in October 2008, during the global financial crisis, the Australian stock market experienced a significant drop, with the S&P/ASX 200 index losing 16.4% over the month. Conversely, in October 2020, amidst the COVID-19 pandemic, the market rebounded strongly, posting positive returns of over 9% for the month.
What About the Rest of the Year?
Remember October is just one month in the annual investment calendar. Historically, the stock market tends to recover from October's turbulence and can finish the year on a positive note. Here's a brief overview of how the Australian stock market typically performs in the other months of the year:
- November & December - Often dubbed the ‘Santa Claus Rally’, these months have traditionally been strong for Australian stocks. Investors often see an ‘end-of-year rally’ as they position themselves for the Christmas and summer holiday.
- January & February - The new year often starts with optimism, and stocks tend to perform well. Many investors enter the year with fresh capital, driving market gains.
- March to May - This period can be mixed, with fluctuations driven by economic data and global events. Investors often assess their portfolios and make adjustments. This period also starts the tax planning season where investors look to use tax effective strategies.
- June to September - The winter months in Australia can be relatively steady, with investors monitoring any developments that might affect the market. Conversely, summer in North America and Europe can reduce trading volume and settle market direction.
It's important to note that past performance is not indicative of future results. While historical trends can provide insights, the stock market is influenced by various factors, and each year is unique.
October has earned its reputation as a tricky month for stock market returns however, it's crucial to view this within the context of historical events and volatility. Investors should consider their long-term goals and diversify their portfolios to mitigate risks associated with any investment.
Remember, successful investing involves patience and a focus on the bigger picture rather than short-term fluctuations. While October may have its challenges, it's just one chapter in the broader story of investing in the Australian stock market.
Don't miss out on any of our content - sign up to our free newsletter here or join us on our socials below!
Comentarios