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October has become a legend among market watchers, with a history of crashes that have come to be known as the “October Effect”, often raising fears that a downturn is on the horizon as fall weather begins to set in.

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“The October effect is basically the idea that the market usually has bad months in October,” E. J. Anthony, a regional economics research fellow at the Heritage Foundation Data Analysis Center, told Fox News Digital.

But whether the evidence supports the idea that October should be the scariest month on the financial calendar remains debatable. While legendary catastrophes such as the Panic of 1907, Black Tuesday, Black Thursday and Black Monday in 1929, and Black Monday in 1987 were marked in this month, the general evidence indicates that October was the same month as and any other.

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“When you actually go back and look at the data, you’ll find that there really isn’t much evidence to support that October is usually a bad month,” Anthony said.


According to LPL Financial’s analysis of the month, October has historically been the most volatile month for markets throughout the year, with the most swings of more than 1% in any direction. But October also saw more bear market endings than beginnings, while September saw more unnamed bear markets.

The overall data shows that while October has been unlucky with a crash history, it may simply be the result of bad luck this month.

“It’s amazing how many horrendous falls in the Dow Jones Industrial Average happened in October,” Anthony said. “In my opinion, this is more of a coincidence than anything else. If you look at the events that caused the severe contraction of the money supply during previous panics, they had nothing to do with the calendar.”

Anthony pointed out that October’s bad reputation may have come even before the crash of 1907, pointing to a credit crunch in the agricultural economy of the 19th century. At that time, the agriculture-based economy had predictable cycles that often peaked in October.

NYSE trader reviewing data


“All the farmers need credit at the same time to buy seeds, to buy fertilizer for their crops,” Antonio said, adding that subsequently the crops “everyone hit the market at the same time.”

“Because the economy was going through these system-wide shocks…these shocks were really spices and, in my opinion, part of where the psychology of the October effect comes from,” he said.

However, Anthony also believes that in 2022, October can live up to its reputation.

“It looks like he can really live up to the reputation this year, whether that reputation is earned or not,” Anthony said. “Whether we’re talking about the US economy or the global economy, there’s little to indicate any increase in growth.”

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While Antony thinks the US economy could grow slightly in the third quarter of this year, October could be the beginning of a severe economic crisis.

“I don’t see any growth on the Horizon,” he said. “One of the key drivers of our at least sluggish economic growth right now is our exports. Well, our exports are about to start going down pretty fast because the dollar is getting very strong against other currencies. And when you have a strong dollar, it will make it more expensive for foreigners to buy our products, our exports, so that will reduce exports, which will also reduce GDP. [gross domestic product].”