October Effect: Pumpkins, Thanksgiving, and Volatility

by Jeffery A. Keill, CFP, CIM, FMA, FCSI, CEA

October is known for pumpkins, Thanksgiving and of course; volatility. This volatility is better known as the October Effect. In Mark Twain’s book, The Tragedy of Pudd’nhead Wilson, there is a line about investing that summarizes the October Effect concept:

” October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.” This, however, is more a product of sensational events that capture our imaginations rather than actual truths that can be captured with success. It is crucial to look beyond the mere headlines of the soup-du-jour where articles are intertwined with biased statistical leanings to demonstrate the sensational remarks. A look at various articles about the October Effect will demonstrate its proclivity even though other research has shown differently, based on time windows, adjustments, or different indexes. October is volatile- but volatility is measured on the swings above and below the average line. Humans naturally tend to focus on the negative (fear of loss) and forget the positive (potential for gain). Markets are inherently volatile, and while some months, like October, may have a notorious past, such as Black Monday in 1929 and in 1987, it is important to keep solid investment framework intact and avoid the milieu of fantasy and fear. Investors, to be successful, should take heed and remember; volatility is a normal part of investing and buying into the October Effect will lead to lower investment success. Once again, by understanding the psychological and historical nuances that can twist our perceptions from reality, we can avoid making emotionally-driven decisions based on things like this calendar- based superstition.

As we roll through the  “jinx month” of October once again, take a deep breath and tune out the noise. I am highly certain you will read a article about the October Effect resulting from the inherent volatility monster that toys with our investing emotions. As always, the wise investor will stay informed, diversified and calm-no matter what the calendar says.

Posted on October 14, 2025