October 2008 - How Bad Was It?
So, the month of October has come and gone, and what a wild ride it was.
For a look back at what happened in October and how it relates to other historical market events, please review the following information from a colleague:
For the month of October 2008, total return for the S&P 500® Index was -16.8%. An explosive rally in the final week—the strongest in 34 years—helped soften the blow.
Excluding the 1930s, the only months with weaker performance than October 2008 were May 1940 (-22.9%) and October 1987 (-21.5%).
For the three-month period ending October 31, 2008, total return for the S&P 500® Index was -23.1%, ranking 329th out of 331 such periods since 1926. Only the three-month periods ending April 1932 (-25.2%) and October 1937 (-26.1%) were worse.
The Dow Jones Industrial Average rose or fell by more than 5% on six trading days in the month of October 2008. A daily change of this magnitude occurred only once in the 1950s, once in the 1960s, and once in the 1970s. It never moved more than 5% during the six-year period prior to September 2008.
The degree of recent volatility is still no match for the level reached in the 1930s. The Dow Average rose or fell by more than 5% on thirteen days in 1931, 37 days in 1932, and 20 days in 1933.
Many non-US markets performed even worse in October 2008: measured either by quarterly or year-to-date results in US dollars, the US ranked fifth among 48 world markets tracked by MSCI. Morocco, Jordan, and Israel came out on top while Belgium, Austria, and Russia were at the bottom.
Oil prices fell 33% in October, the sharpest one-month decline since the introduction of oil futures in 1983.
The Dow jumped more than 10% on two trading days in October 2008 (13th and 28th), the strongest one-day advances since March 15, 1933. On that day, the Dow Industrials soared 15.3% when markets re-opened following President Roosevelt's "bank holiday."
MSCI data copyright MSCI 2008, all rights reserved. Norris, Floyd. "A Monthlong Walk on the Wildest Side of the Stock Market." New York Times, November 1, 2008. The S&P data are provided by Standard & Poor's Index Services Group. Yahoo! Inc. Yahoo! Finance. In www.yahoo.com, accessed November 4, 2008.
Bottom line: we've been here before and lived to tell about it. In fact, we've been in much worse shape before and both the economy and market have ultimately gone on to reach new, higher ground.