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Ask A Trust Officer

October Market Crashes

Dear Trust Officer:
“Should I be worrying about a stock market crash in October?”
—Student of Financial History

Dear Student:
There is a common misunderstanding that October is a dangerous month for stocks. The great crash of 1929 was in October, as was the Panic of 1907; these events may have planted the seed. The misunderstanding flowered after the market crash in October 1987, when many newspapers charted the parallels between market movements in 1929 and 1987.

In the history of the stock market, Septembers have actually been worse than Octobers. Market losses in September 2001 (after 9/11) and in September 2008 were much greater than in 1987. On a single day in September 2008, the global market lost $2 trillion!

So, there is nothing magical or uniquely dangerous about October. However, by traditional measures, stocks are very experience right now. Price/earnings ratios are well above the long-term averages. The current expansion is more than 8 years old. A market correction in these circumstances would not be surprising.

Do you have questions concerning wealth management? If so, send them over to Adam Cox, JD, MBA; he’d be happy to help.

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