October Crash Fears Overblown, Historical Data Shows; S&P 500 Rebounds 7.4% on Average from October Lows

October's reputation as a high-risk month for U.S. stock market crashes is not supported by data, according to analysis citing historical trends and academic research. Since 1957, the S&P 500 has risen from its October low to year-end in 93% of years, averaging a 7.4% gain — nearly double the average advance for the other 11 months. Market sentiment, not fundamental risk, appears to drive the seasonal caution. Since 2000, average equity exposure recommended by Nasdaq-focused market timers in October was just 13.6%, less than half the 26.1% for other months. Harvard professor Xavier Gabaix's model puts the probability of a single-day crash matching 1987's 22.6% Dow drop at just 0.06% in any October, with a 12.8% crash (1929-style) at 0.30%, rates consistent across all months. Separate research by Harvard's Robin Greenwood and Andrei Shleifer, and HKU's Yang You, finds the probability of a 40% two-year market decline is in line with historical averages.