By the way, of the 22 months that saw 10 percent declines or worse, three were Octobers. That is more than you'd expect by chance, but it's not enough to really uphold October's fierce reputation.
Look at the table of the S&P 500's ten worst declines in a calendar month. As you see, the two famous crash months, October 1987 and October 1929, both make the list, but they rank only fifth and seventh. A steady decline can do more damage than a sudden, violent crash, as the six examples from the 1930s show.
The stock market usually reacts more strongly to economic news than to political or even military crises. The market drop in the first week of trading following the terrorist attacks of Sept. 11 was a bigger reaction than stocks had to Pearl Harbor, the Kennedy assassination, the Cuban Missile Crisis or the build-up for the Gulf War in 1990.
The triggers for a market decline or a crash can be numerous.
One of the most common and most important is rising interest rates. That unpleasant influence played a part in the crashes of both 1987 and 1929. It is not present today.
When the Federal Reserve lowered the federal funds rate to 2.5 percent on Oct. 2, it was the ninth time this year that the central bank has acted to lower rates and it resulted in the lowest rates since John F. Kennedy was president.
In short, we have already seen a major stock market decline, stock valuations are not cheap but are better than they were, and the Fed is aggressively lowering interest rates. In my opinion, this is not the stuff of which crashes are made. In fact, it is a pretty decent time to invest.
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