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The October Effect – When Will the Bullish Bubble Pop?

The U.S. stock market has been on a bullish run for the better part of 8 years. Since 2009, the S&P 500 & DOW have more than tripled while the NASDAQ has increased fivefold.

Although the market has seen its setbacks throughout the last 8 years, the long-term trend points to all things bullish. As we round out the last quarter in 2017, the markets continue to record higher highs so often that it’s often no longer a newsworthy event. Let’s not forget the 20K DOW milestone was only just hit in January 2017. Now, 23K is in site!

DOW S&P 500 NASDAQ Chart

Higher highs have continually recorded this year despite a number circumstances that would traditionally call for a setback. Be it geopolitical concerns, uncertainty in Washington or a slew of natural disasters, nothing has seemed to rattle this bullish trend.

From a pure economic perspective, the market has good reasons to fuel its bullish run. Interest rates have been at historic lows pushing investors to look for more ROI than traditional bonds. Plus, most economists agree the world economy is in fairly good shape while consumer confidence & cooperate profits are high.

Although no one can truly predict the stock market, many are asking – are we reaching the bubble? When is it going to pop? When will volatility return? What goes up must come down…but when?

A term familiar with most financiers, known as the “October Effect” may instill fear that October 2017 could be the end of the bullish run. Taking a step back in time, The Panic of 1907, Black Tuesday of 1929 and Black Monday in 1987, all occurred in October. One outlier to the October Effect is the Financial Crisis of 2007-08 that set the markets on a nose dive occurred in September which ultimately was the dawn of the current bullish run.

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