The 10 Worst Months in S&P History and What Followed

October 31, 2008

I received the following email this morning:

I recently came across your blog, and enjoyed the read. I’m trying to do some research on the top-10 worst performing months for the S&P, and how the markets performed 1 month and 6 months after each of those months.

Do you have any further info and data pertaining to this?

I didn’t have the information readily-available but I did have all the data required to make the calculation, so I spent some time this morning running the numbers. Here is what I found out:

October 2008 is shaping up to be in the top ten worst months in S&P history. As of yesterday’s close, the S&P 500 Index had a return of -18.05%, which would put it at number nine in the 10 worst months in S&P history. Of course we have no way of knowing what will happen over the next six months, but if history is any guide, it may not be as bad as we think:

The 10 Worst Months in S&P History and What Happened the Following Month and Six Months

Only twice in those ten results did the S&P have a negative return over the following six months. Interesting…

One thing that does bug me about these numbers is the fact that most of them are clustered around the 1930s. I even expanded the results to include the 30 worst months and found 22 of them occured in 1940 or earlier. In other words, I wouldn’t use this information as a crystal ball.

I’ll work on a follow-up to this post and include the 50 worst months to see if the results change any.

Stay tuned…

13 responses to The 10 Worst Months in S&P History and What Followed

  1. I wouldn’t put any faith in that reasoning. It took the markets 27 years to recover from the last Great Depression.

  2. Curt,

    I’d be interested to know where you got your information.

  3. Those are some really curious results. Granted, 6 months is still very short-term, but it at least gives a glimmer of hope.

  4. Considering that this crisis is unlike any that we have experienced before (ie: global), I am unsure how historical data would do us much justice.

    With that said however, I would still be interested in finding out the results.

  5. Very interesting. Thanks for sharing. I agree that the data cannot be used as a crystal ball, butr I will say this: the market always over reacts – both up and down. Things aren’t as great as stock valuations would lead you to believe in the good times, and they certainly aren’t as bad now…

    Yeah, there may be another down leg somewhere in the future, but ultimately, this is a phenomenal time to buy for those who plan to hold for the long term.

  6. Actually it took the market only 15 years to recover from the great depression if you add dividends to the equation. Anyone that owned stocks in 1929 broke even by the mid 1940s.

  7. Dividend,

    These numbers DO include dividends.

  8. It took the Dow 25 years to recover from the last Depression, and if you added inflation it would probably be 30 years.

    April 1, 1929 – Dow 343
    Jun 1, 1954 – Dow 360

    If we are at the beginning of another Great Depression (and I believe we are), I’m not willing to wait 25 years for the market to recover. There are plenty of other investment options – like gold, silver, oil, China, etc.

    Investing in the US market today is like throwing your money out the window. And keeping cash is just as bad because of the major inflation that is about to hit the economy from the Fed’s actions to flood the market with printed money – and the growing threat of the world to sell their dollar reserves.

    Investment decisions as this point in time are perhaps likely to be a once in a lifetime opportunity or complete failure. Choose wisely, don’t follow the herd over the cliff.

  9. Curt,

    Inflation averaged .50% from 1929 – 1945. No, that’s NOT a misprint.

    If you jump into gold, silver, and other commodities right now, aren’t you just following the herd?

  10. Curt,

    You’re also not including dividends in your Dow numbers, which would change things substantially.

  11. Also, the Dow is not the market. It’s a tiny little group of huge-cap stocks weighted randomly (i.e. by stock price). Why aren’t we walking about the S&P 90?

  12. Curt – if you think the herd is buying stocks right now, then you and I are reading different newspapers.

  13. These wide range of performance shows proof that active management and active rebalancing between stocks and bonds will be important for the next decade.