We're now at an early point in the Q3 2012 earnings season, which happens, of course, in October, historically the most volatile month in the U.S. stock market. Let's step for a moment into the realm of market trivia and consider the October Effect in the stock market. October is the month that has, by far, hosted the most major market bottoms -- five of the ten in the chart below. As for market tops, October has hosted only one since 1950, the all-time high on October 9, 2007 -- the fifth anniversary of which we celebrated on Tuesday.
In terms of average monthly performance, here's a chart illustrating the behavior of the months since 1950. September has the worst track record. October is somewhere in the middle of the pack.
But now let's consider monthly volatility, by which I mean the percent change from intra-month lows to intra-month highs. The adjacent table clearly documents the volatility of October, the highest of the twelve. A survey of all the months with 10% or more intra-month volatility puts October at the top, as does a ranking by the average intra-month volatility.
So if you don't like volatility, you've traditionally been happier when Halloween is a memory.
Note: The 1950 start date uses spiced data from the S&P 90 for the index prior to the launch of the 500 in March 2009. This is the widely used data series made available by Yahoo Finance. The troughs in the first chart are based on daily closes with a -20% or more qualifier, with one concession — the 19.9% decline in 1990, which would have been greater if we were using intraday highs and lows.