US elections and the growing threat of new uncertainties.
For some investors, the month of October is historically doomed —as long ago suggested by the celebrated Mark Twain quote— and October 2020 was no exception. Based on this presumption, some investors might have the perception that the expected equity returns of any given month of October in a long time series should be mostly negative. According to our calculations, since 1930 the S&P 500 has performed positively on 59% of the observations, and by extension, negatively on 41% of them. The corresponding equity returns for the month of October for any given year in the time series 1930-2020 do not show any statistical anomaly since, again, 59% of the observations bring in a positive number. However, some of our most skeptical readers might wonder if, on any given electoral year since 1930, the month of October performed negatively due to the background noise caused by the presidential run. Again, the data shows an absence of anomalies; no one cast a spell on the month of October of an electoral year as the ratio between positive and negative returns stands at 59/41. In other words, statistically speaking, if any random investor placed a bearish bet at the beginning of any given October on the monthly performance of the S&P500, chances are he would lose money 59% of the time.