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Why October Is the Worst Month for Investors

An August slump sets the stage for a rocky October.

Here’s some advice for investors hoping for some calm after the recent stock market volatility: “Expect the unexpected, and get yourself used to bigger swings,” says Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS. “Even though the market has a positive bias and we’re looking for a fourth-quarter rally, it’s going to remain volatile.”

Over the past 20 years, October has been the choppiest month for stocks. This year may follow the pattern of 2011, 1998, and 1990, when steep declines in August were followed by further downdrafts in October. “We are in an important seasonal stretch, a time in history when the August and October period is very volatile,” says Chris Verrone, head of technical analysis at Strategas Research Partners. “We’re not done with the correction quite yet. The repair process takes many months, and part of that repair process is going back and undercutting initial lows.”