October may not be as bad for the stock market as investors think: Chart of the Day

October may not be as bad for the stock market as investors think: Chart of the Day

October may have a scary reputation for stocks, but when it comes to seasonality, its batting average is solid.

After closing out September, historically the worst-performing month of the year, down 0.45%, this month could shape up to be more bullish.

October ranks among the top months by average return, at 1.9%, tied with November and July, despite its reputation for volatility. Much of that perception is due to 2008, when the S&P 500 (^IXIC) declined nearly 17%. Remove that outlier, and the average return jumps to roughly 2.7%.

Overall, October's win rate over the past 30 years is 63%, with stocks posting positive returns in 19 of those years, according to Yahoo Finance AlphaSpace data.

Still, there's plenty for investors to be nervous about as the 10-year Treasury (^TNX) yield, used as a benchmark for mortgages and other loans, has touched its highest level since 2002.

However, recent inflation data and dovish commentary from New York Fed president John Williams prompted Goldman Sachs economists to call a rate hike in October unlikely.

"We are pushing back the second hike in our forecast to December, and we see a strong chance that the FOMC will ultimately conclude that additional rate hikes are unnecessary," chief economist Jan Hatzius wrote earlier this week.

Stocks got off to a positive start during Thursday's session, with all three major averages gaining, as Technology (XLK) stocks rose on the heels of memory maker Micron's (MU) strong quarterly results.

Beyond October, strategists are looking to the upcoming earnings season and continued enthusiasm for the AI trade in November and December to carry stocks through what is seasonally the strongest quarter of the year.

"If you step back, fundamentals are actually strengthening into year-end," Janus Henderson Investors research analyst Shaon Baqui told Yahoo Finance on Thursday.

Hyperscaler growth rates are accelerating, backlogs are expanding, and token growth is rising exponentially.

"While the headlines could be a little spooky, I think fundamentals continue to strengthen into year-end," Baqui added.

Ines Ferre is a Senior Business Reporter for Yahoo Finance covering the US stock market, publicly traded companies, and commodities.

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