Cetera® Investment Management LLC CETERA INVESTMENT MANAGEMENT // NIGHTMARE ON WALL STREET 2
Halloween is near. Be on alert for ghosts, vampires, and scary October market volatility. It’s easy to be terrified by spine-chilling stock market headlines, and it doesn’t make it any easier when investors have been haunted by some of the scariest moments in market history in the month of October. In the spirit of Halloween (no pun intended),* we’ll share a few grim October market tales. If you’re easily scared, we suggest that you skip to the next section—we don’t recommend reading these in the dark! Thankfully, there are some reassuring WHISTLIN’ PAST THE treats that await. GRAVEYARD Now, gather ‘round the fire for a few… Tales from the Market Crypt: INDUSTRY OF FEAR Haunted houses in America are a product The year was 1929 and the Roaring Twenties were coming of the Great Depression. In the early years, to an end. Rampant speculation had driven stock prices there was an issue with vandalism by kids to a nose-bleed peak in early September. Over the next during Halloween. In response, parents and month and a half, the stock market trended lower as communities organized haunted attractions to Halloween approached. Then “Black Thursday” occurred: divert mischief.1 One week ahead of Halloween, on Thursday, October 24, the Dow Jones Industrial Average (Dow) sunk 11%. There are now more than 1,200 haunted Massive losses continued the following week on two attractions in America that charge a fee, and of the most infamous days in market history. Known as more than $300 million of annual revenue is “Black Monday” (October 28, 1929) and “Black Tuesday” generated by these fear factories.2 The outlook (October 29, 1929), the Dow fell by 12.8% and 11.7% on for the industry of fear doesn’t appear to be a consecutive days. During the Wall Street Crash of 1929, grave concern. millions of shares were sold, and many investors were Stephen King’s It is the highest grossing wiped out. Stocks did stabilize over the following months, horror film of all-time. The 2017 clown thriller but eventually the losses continued as the country fell generated $700 million at the box office. into the Great Depression. Without a doubt, this pre- Halloween crash produced more nightmares than any other stock market event in the last 100 years. DEVIL’S LOW Nearly 60 years later, the second “Black Monday” The 2007 to 2009 stock market crash resulted in occurred. It was 1987 and stocks got off to a fast start that an S&P 500 peak-to-trough decline of -56%. The year. The Dow was up more than 40% by August. Over the intra-day low of that crash was 666 on March 6, next few months, market volatility began to emerge from 2009. It’s eerily known as the Devil’s Low. the shadows as stocks hit a rough patch. Less than two weeks before Halloween, on October 19, 1987, the largest Markets haven’t been so scary since the Devil’s one-day decline in Dow history occurred. Investors were Low was reached. The S&P 500 is now near absolutely terrified by the jaw-dropping Dow decline of 3,000 and has generated a total return of more 22% on “Black Monday.” than 400% since the devilish bottom.
* Ok, we did kinda intend this pun.
1 https://www.history.com/news/halloween-haunted-house-great-depression 2 https://www.americahaunts.com/ah/facts/ CETERA INVESTMENT MANAGEMENT // NIGHTMARE ON WALL STREET 3
Friday the 13th was more frightening than usual on October 13, 1989. News of a failed leveraged buyout of United Airlines generated panic in the junk bond market. This spooked the stock market and caused a one-day Dow decline of 6.9%. For those that are superstitious, a broken mirror was certainly to blame for the Friday the 13th stock market scare, or possibly a black cat crossing Wall Street. 2008 was a sinister year for stocks. It was the scariest year for stocks in recent memory, and October caused the most alarm. The financial crisis was in full swing by the time fall arrived—that September, the federal government took over Fannie Mae and Freddie Mac, the Federal Reserve rescued AIG, and Lehman Brothers collapsed. In an attempt to stabilize the banking system, Congress passed the Emergency Economic Stabilization Act of 2008 (AKA the bank bailout of 2008) in early October, but it wasn’t enough to calm markets. The S&P 500 declined by more than 16% that October and finished 2008 with a total return of -37%. By the time Halloween arrived, investors had already experienced enough horror in one of the most chilling periods in market history.
DON’T BE AFRAID Before you let out a ghastly scream, remember that stocks eventually came back from the dead in each of these cases.** It’s true that some of the most notorious market crashes happened in the days leading up to Halloween, but the majority of the time, October is not terrifying.*** In the last 40 years, the S&P 500 has been positive in October roughly two-thirds of the time, with a shallow loss in most of the years where a decline occurred. The average October return over the last 40 years is 1.1%; over the last decade, that figure jumps to 2.0%. The horror stories we shared demonstrate real market risks, but keep in mind that declines of significant magnitude in a short timeframe are rare, and ghostly market volatility can occur in other months, too. Halloween should be fun, not scary, and the same is true for investing! By understanding the role of stocks in your portfolio, and by choosing a risk level you’re comfortable with, you should be able to sleep well at night…until you hear a werewolf howling at the moon… From Cetera Investment Management, have a fun and safe Halloween!
** It took a few decades for stocks to recover and make new highs after the 1929 crash because of the Great Depression. *** That is, of course, until Halloween night when zombies emerge from the darkness and you can hear a witch’s cackle through the fog. In all likelihood, these are probably just your neighborhood trick-or-treaters. Probably. About Cetera® Investment Management Cetera Investment Management LLC is an SEC registered investment adviser owned by Cetera Financial Group®. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
About Cetera Financial Group® Cetera Financial Group (“Cetera”) is a leading network of independent firms empowering the delivery of professional financial advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions. Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions. Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations. Advisor support resources offered through Cetera include award-winning wealth management and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology. For more information, visit cetera.com. “Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Investment Services (marketed as Cetera Financial Institutions or Cetera Investors), Cetera Financial Specialists, and First Allied Securities. All firms are members FINRA/SIPC.
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