October fills some investors with dread, and I can see why. Historically, some of the biggest market crashes — 1907, 1929, 1987 — have occurred in this month. So should we all hide behind a collective sofa and await a mighty tumble in the FTSE 100?
Primed to fall?
It’s fair to say that the UK economy isn’t exactly motoring along. While inflation finally appears to be slowing, a rising oil price suggests we’re not quite done. And if analysts and economists fail to keep expectations in check, the markets could react negatively when the next set of figures arrive.
It’s also worth paying attention to what’s happening elsewhere. Across the pond, the US market is being held up by the efforts of a merry band of mega-cap tech stocks and excitement (hype?) around AI.
As a rule, being overly dependent on just a few companies for success is inherently risky. This is especially true if they’re trading on sky-high valuations.
On the other side of the world, China’s property market is looking dangerously fragile. The country is also battling high youth unemployment, lower foreign investment and slowing growth.
In the middle, Ukraine is still battling valiantly against Russian invaders.
It’s hardly a bullish backdrop.
On the bright side…
Now, it can be claimed that the above are all examples of ‘known knowns’ – to adopt the terminology used by the late former US Secretary of Defense Donald Rumsfeld. In other words, they are things we’re aware of and understand. As a result, their power to shock — and cause market upsets — is diminished. It’s uncertainty markets hate.
This might help to explain why the FTSE 100 has actually held its own in September and, indeed, 2023 as a whole. Unless we get the mother of all surprises in October, things could be just fine, or at least bearable.
There are other chinks of light. The Bank of England has slammed the brakes on interest rate rises, suggesting that we may be near the peak, or even past it. This may push some consumers to loosen their purse strings, albeit slightly.
Perhaps the biggest silver lining to all the economic clouds is that a lot of negativity already looks priced in to UK stocks. Out of interest, October has also marked the end of several bear markets over the years.
Here’s what I’m doing
Of course, the stock market doesn’t care one jot about what I think. Those highly-paid fund managers in the City? They don’t care either. Depending on how investors are wired, it’s either a recipe for frustration or a reason to ‘keep calm and carry on’.
Personally, I think it’s vital to adopt a stoic attitude to investing. That involves recognising those few things that are within my control (minimising costs, conducting sufficient research, knowing when to walk away from the laptop) and those that are not (basically, everything else).
To be blunt, who cares if the FTSE 100 falls in October? Its performance over a short period of time is arguably just noise for true long-term investors.
What’s more important is that I continue to invest through thick and thin for years. If I’m given the opportunity to snap up these great stocks at bargain prices along the way, all the better.
