How many times did the stock market crash in November?

Anyone worried about the “October effect” can breathe a big sigh of relief. There is a relatively common – but unfounded – view that the tenth month of the year is generally bad for stocks. As it turned out, the stock market did quite well in October.

But for some investors, worrying is as natural as breathing. It’s tempting to simply push forward concerns about a potential market disaster.

Is there a reason to bite our nails about a possible stock merger this month based on history? How many times did the stock market crash in November?

Image source: Getty Images.

The biggest crashes

There is good news and bad news about the biggest stock market crashes in history. First of all, the good news: none started in November. It should be at least somewhat heartwarming for anyone concerned that history will repeat itself.

The most recent market collapse, of course, began in late February 2020 as the coronavirus began to spread rapidly around the world. Before that, the huge financial crisis of 2008 had the biggest impact on the stock market in October.

What about the bursting of the dot-com bubble? This has occurred over a relatively long period, although two of the largest monthly declines occurred in March and September 2001.

The bad news, however, is that major market crashes have lasted until November in the past. For example, the infamous crash of 1929 began in late October, but stocks continued to plunge until November.

Year by year

Let’s look at how the S&P 500 performed in November over the past 40 years. There is actually a pretty good story.

Graph showing the gains / losses of the S&P 500 in the month of November by year from 1981 to 2020

Data source: YCharts. Chart by author.

The average return of the S&P 500 in the month of November for the past 40 years is 1.57%. The median return is even better – 2.41%.

The S&P 500 posted a positive gain in November for 29 of the past 40 years. In six of those years, the Index has achieved returns of 5% or more. He also came very close to reaching that level for another year.

The S&P 500 Index fell more than 5% in November only three times in that long period. And it was a continuation of the major market downturns that started earlier.

Do not worry

Perhaps the best antidote to worry is to take action. For example, you might be worried that stock valuations are at a premium right now. You may want to increase your cash position so that you can buy more heavily in a downturn.

Even Warren Buffett doesn’t buy a lot of stocks these days. It is led Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) increase its cash reserves to nearly $ 141 billion. And Buffett is very selective about the stocks he buys. Berkshire bought shares of just three shares in the third quarter.

There is a better alternative to worry about stocks, although we had reason to believe this month could cause the market to fall. Instead of focusing on what the stock market could do in a month, think about what it always does in the long run: go up.

If you have a long-term mindset, even a major setback shouldn’t upset you that much. Buffett himself has survived several market meltdowns. By keeping his eyes on the long haul, he has seen tremendous success.

Even if you are still tempted to worry, remember that there is no need to worry about a negative effect of November on a historical basis. If there is an effect, it is positive.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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