In October, Stocks Soared. Is the Bear Market Dead?

Historically, a boffo 10th month of the year for the Dow has led to even more outsized returns going forward.

stock market green numbers
(Image credit: Getty Images)

It remains to be seen if October will maintain its reputation as a bear-market killer, but so far so good. The Dow Jones Industrial Average logged its best October ever, while the broader S&P 500 delivered impressive gains of its own.

Even the Nasdaq Composite, while lagging the other two major indexes by wide margins, chipped in handsomely. And that's despite the tech-heavy index laboring under the weight of truly dismal performances from its largest components.

Indeed, the Dow itself shrugged off selloffs in tech constituents such as Apple (AAPL) and Microsoft (MSFT) to generate double-digit percent gains for the month.

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But what's most encouraging is what has historically come next when the Dow produces a boffo October: the blue-chip barometer has gone on to generate even more impressive upside over the following three-, six- and 12-month periods. 

The Dow finished the month of October up 14%. That's the average's best month overall since 1976, and its best October in history, according to Ryan Detrick, chief market strategist at Carson Group. Have a look at the three major benchmark's October returns in 2022:

major benchmarks October 2022

(Image credit: YCharts)

The Dow's historical performance from here, however, is where things get really interesting. As Detrick notes, since World War II, whenever the Dow has logged a gain of at least 10% in October, it has gone on to do great things. Have a look at the table below, courtesy of Carson Group.

dow returns

(Image credit: Ryan Detrick, Carson Group)

If past is prologue, there is an 82% chance that the Dow will be higher both three months and six months from now, and a 73% chance that it will be higher rather than lower in 12 month's time. Even better are the magnitude of the Dow's returns.

As you can see in the above table, the Dow's three-month average return following a 10%+ October gain is 5.6%. Six months out, the average increase hits 10.7%. And as for a year later? The Dow has delivered an average return of 15.9%.

Past performance, as we all know too well, is not indicative of future returns. There are no guarantees that the Dow's excellent October of 2022 will translate into outsized gains in the months and year ahead.

Nevertheless, this is indeed an extremely encouraging historical fact. And goodness knows, the market needs all the reasons for optimism it can get right about now.  

Dan Burrows
Senior Investing Writer,

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.