NOREEN: See? October wasn't that bad on Wall Street
We just got past that spooky time of year.
You know, that horrendous season when historically, the grim reaper reaches out on black Mondays, seizing our prosperity and signaling our collective doom. No, not Halloween: Another October at the stock market has come and gone.
On this last dark Friday, the Dow-Jones Industrial average fell 249.85 points, enough to chase faint hearts to the whiskey cabinet, if not the bond market.
Note, though, that the word “crash” was not used. In spite of Friday’s drop, the major stock indexes lagged only slightly in October, preserving what has been a remarkable year for investors. In fact, the experts say October really isn’t that scary, viewed through the long lens of history.
Jerry Bruni, who runs J.V. Bruni and Company, a Colorado Springs investment firm, said “if you go back and look, there are no months that stand way out.”
Despite stock plunges in October of 1929, 1987 and 2008, “the more we stretch it out, the more the spikes look smaller.”
Translation, at least for this October: Don’t worry, be happy, it’s not time to invest in canned goods just yet.
Bruni, who also operates the Bruni Foundation, said a minor negative statistical truism still bears out for investors in September and October. But it has less to do with past market crashes and more to do with the fact that some major mutual funds operate on a fiscal year that ends Sept. 30 and that some investors “try to do their tax-selling early” to position themselves for the IRS.
On Oct. 29, 1929, the Great Depression began when the market lost 12 percent of its value in a single trading day. What was worse, the market eventually lost 90 percent of its value and the nation bumped along for a dozen years.
“The unemployment rate was twice as high then as it is now,” Bruni observed.
Finally, a stimulus package (some people call it World War II) ended the Depression. We spent money we didn’t really have ramping up the armed forces and a war machine manufacturing boom unlike anything the world has ever seen.
In October 1987, the bottom dropped out again, as the market lost 22.6 percent of its value in one day, Oct. 19. With 20-20 hindsight we now see that as a historic buying opportunity, a prelude to the go-go 1990s.
October 2008 staggered us again. Through most of the year the market has been recovering from that.
All this matters because the recession is not only about jobless numbers. It’s about college funds and retirements.
Many Americans are in 401(k) plans or individual retirement accounts. Regular folks have a direct stake in the market like never before.
In the market, every day is trick or treat.
October is behind us. There may be smashed pumpkins in the street, but we can grow more.
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