“I knew you were trouble when you walked in.”
Taylor Swift may not have been singing about October, but generations of investors could be forgiven for thinking she was. The month has been associated with some of the most dramatic moments in stock market history, from the crash of 1929 to Black Monday in 1987.
October has certainly earned its reputation for drama. The historical record, however, is far less ominous.
For investors, whether October proves volatile matters less than whether their broader financial plan is built to withstand periods of uncertainty. Seasonal patterns can provide useful context, but they should always be considered alongside an investor’s time horizon, liquidity needs and broader financial circumstances.
Reputation versus reality
It is easy to understand where October’s reputation comes from. On Black Monday in October 1929, the Dow Jones Industrial Average fell nearly 13 per cent, followed by another decline of almost 12 per cent the next day. In October 1987, the Dow plunged 22.6 per cent in a single session, still its largest one-day percentage decline. During the global financial crisis in October 2008, the S&P 500 fell 16.8 per cent while the S&P/TSX Composite declined 16.7 per cent.
Those episodes became part of market folklore. But they are hardly representative of the typical October.
My analysis of Bloomberg data over the 25 years from 2001 through 2025 provides a more nuanced picture. Over that period, the S&P 500 produced an average October price return of 1.6 per cent and finished higher in 16 of the 25 years, or 64 per cent of the time. The S&P/TSX Composite averaged a more modest 0.4 per cent gain, but finished higher in 17 of those 25 Octobers, or 68 per cent of the time.
Interestingly, October’s reputation is not entirely misplaced when it comes to volatility. The Cboe Volatility Index, or VIX, measures the market’s expectation of S&P 500 volatility over the coming 30 days based on options prices and is often referred to as Wall Street’s “fear gauge.” Higher readings generally indicate greater expected market turbulence.
The same 25-year analysis shows that October had the highest average monthly VIX level of any month, at approximately 21.8, based on average daily closing levels.
In other words, October has historically lived up to its reputation for volatility more than it has for poor returns. But higher volatility does not necessarily translate into negative returns. Over the past quarter-century, both the S&P 500 and S&P/TSX Composite have finished October higher more often than not.
Why the bad reputation sticks
So why does October continue to make investors nervous?
Behavioural finance provides part of the answer. Investors tend to place greater weight on vivid events that are easily recalled, a tendency known as availability bias. A routine month in which stocks rise one or two per cent is quickly forgotten. A historic crash can shape perceptions for generations.
Mention October and many investors immediately think of 1929, 1987 or 2008. Few are likely to remember an uneventful October when stocks simply moved modestly higher.
This illustrates why averages need context. October’s positive historical average does not make it inherently safe, just as its history of crashes does not make it inherently dangerous. Both can be true: the month has produced extraordinary declines while still delivering positive returns more often than its reputation might imply.
Seasonality is context, not strategy
Seasonality can provide useful context. Markets do exhibit recurring patterns across the calendar, but those tendencies are not forecasts.
Interest rates, inflation, economic growth, corporate earnings, valuations, and investor sentiment ultimately matter far more than the month on the calendar. An average historical return cannot tell us what will happen this October.
Historical patterns may help frame expectations, but they are a poor basis for short-term market timing. The calendar alone cannot tell investors when to get in or out of the market.
October may walk in with a reputation for trouble. History suggests investors should look beyond the reputation and focus on the evidence.
Seasonality can provide perspective, but investment decisions should ultimately reflect each investor’s objectives, time horizon, liquidity needs and risk tolerance within the context of their broader wealth plan.
