Opinion: October markets, a pause before the election

Richard Baker

“Dinner was just OK.” After almost 30 years of marriage, I realized this was never the correct answer to my wife's question about whether I liked dinner. That being said, October is usually an OK month for stocks. While “just OK” doesn’t win me any points with my wife, that is the best way to describe October markets. Unless, of course, it is an election year.

In nonelection years, the S&P 500 average return in October over the last 10 years has been almost 2%. October is quite middle-of-the-road. Unless, of course, it is an election year.

Looking back to the presidential election years since 1950, stocks in October have averaged a negative return of almost 1%. Only one October market (2004) in the past six election years has finished with a positive return. This is because stock markets don’t like uncertainty, and in the weeks leading up to the presidential elections, there is a lot of negativity in the media, and investors feel uncertain. It isn’t surprising that markets fluctuate and get more volatile in the last weeks of a major campaign.

So far this year, stocks have followed the historical election-year cycle by being overall positive with a summer dip. If 2024 follows a similar pattern, we could see stocks struggle through October until the election. In election years, stocks often find a bottom a few days before the election, which usually leads to strong November and December markets.

This presidential election year is feeling a little more uncertain than usual because:

• The campaign is very contentious.
• There is a strong chance of a widening war in the Middle East.
• China’s economy is struggling so badly that it is implementing the greatest stimulus in its history, which will affect global markets.
• Lastly, there is a major dockworker strike at American ports.

With all these backdrops, it would not be surprising to see stocks slide some in October as markets take a breath ahead of the election.

I am staying neutral on stocks, but I am especially watching the Middle East and how an escalating war could affect oil. All that said, things are lining up favorably for stocks immediately after the election and in the fourth quarter.

I am a pretty picky eater, having grown up with consistent meat and potato fare. Then, this cute city girl came along and made me eat vegetables, rice and a whole lot of baked chicken, which was “just OK.” Like October stocks, sometimes you have to just smile and endure it because something better is just ahead.

Richard Baker, an accredited investment fiduciary, is the founder and executive wealth adviser at Fervent Wealth Management LLC in Springfield. He can be reached at richard@ferventwm.com.