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One phenomenon of note is the performance during
"Octobers of years ending in 7"
Is October of year 7 just one more statistical quirk, or is there information that investors need to protect themselves? Take a look at the results and judge...As you can see in the following Table,...
...the results for the Dow in Octobers of years ending in 7 have been pretty dismal.
It must be said that this is a fairly small sample size; likewise, most individuals will not be comfortable acting on some trend that occurs only once every decade and lasts just one month. Still, the numbers should be enough to give you pause before investing aggressively during October of a year ending in 7. Consider the following performance results:
♦ The annualized rate of return during Octobers of years ending in 7 was -54.7 percent.
♦ The annualized rate of return during all other trading days was 7.3 percent
♦ The Dow posted a gain during Octobers of years ending in 7 twice and a loss nine times.
♦ The average gain for the month during up Octobers of years ending in 7 was 1.3 percent.
♦ The average loss for the month during down Octobers of years ending in 7 was 9.5 percent.
♦ On four occasions the performance of Octobers of years ending in 7 exceeded -10 percent for the month
(1907 = -14.8 percent, 1917 = -11.1 percent, 1937 = -10.6 percent, and 1987 = -23.2 percent).
The bottom line regarding Octobers of years ending in 7 is that even when they aren’t bad, they still aren’t very good. And when they are bad, they are really (!) bad.
The next Figure displays the growth of USD 1,000 invested in the Dow only during the month of October during years ending in 7 since 1900. As you can see in that Figure, the results generated during Octobers of years ending in 7 has been nearly uniformly dreadful:
Conclusion:
So, had investors decided to play it safe and completely sit out the October of years ending in 7 in each decade, they twice would have missed out on small gains but never would have missed any truly meaningful rallies. This is something to note when October 2017 rolls around...
Gimmick:
Examining the performance of the stock market during September and October. I conclude that investors may often do themselves a great favor by being out of the market during these two months...(if they can handle it - which is another question).
