October Effect

October is a spooky month. It ends with Halloween, obviously, but even besides that, it has an air of impending doom. Winter is coming, and all that.

This sense of pending foreboding manifests itself on Wall Street as well. It's called the October effect. The term refers to the perception that October is a bad month for the stock market...which may in part lead to October becoming a bad month for the stock market.

The main pillars of the Legend of October Scares comes from a handful of significant stock crashes in the month. Both the 1929 and 1987 market collapses happened in October. These events have made investors jumpy (even though one of those crashes is closing in on a century old), leading to a sometimes self-fulfilling prophesy of poor stock market performance in the month.