October Is A Thriller

Markets are not disappointing investors who are seeking a thrill. October is usually one of the more volatile months of the year, and so far, the first part of the month is

following through on that tradition. The inspiration for this week's musings is the 1982 hit song, "Thriller" by Michael Jackson. This may be the first time we've featured three different songs by the same artist in 6 month's time. Here’s some trivia about the song:

• This song hit #1 on the Billboard charts in 1983, but much of that was due to the unique music video. This is one of the best-selling singles of all time, selling more than 9 million copies. Jackson decided to release the single after the other top hits from the "Thriller" album - "Billy Jean," "Beat It," and others - had run their course and the album had dropped out of the top 200 on Billboard. The "Thriller" single and music video vaulted the album back into the top 10 on Billboard and subsequently made the album the best-selling album of all time.

• The music video was a cultural milestone with group choreography, costumes, makeup, and dialogue. It ran non-stop on MTV. This was due in large part to Director John Landis, who directed "American Werewolf In London" in 1981. Jackson was fitted with prosthetic makeup to turn him into a werewolf .

• For those of you who remember watching the video, a disclaimer appears as the video begins which stated, "Due to my strong personal convictions, I wish to stress that this film in no way endorses a belief in the occult." Jackson, who was raised in the Jehovah's Witness church, added the disclaimer after receiving criticism from Witness leaders who objected to zombies and other creatures as a "violation of their beliefs."

• The video cost about $500,000 to produce. However, deals with Showtime and MTV made the video available directly to customers for purchase. A distribution deal with Vestron helped push the sales. The video came with a behind the scenes look at how they made Jackson into a monster. Approximately $285 million was earned off of the video sales.

"It's close to midnight and something evil's lurkin' from the dark

Under the moonlight you see a sight that almost stops your heart

You try to scream but terror takes the sound before you make it

You start to freeze as horror looks you right between the eyes,

You're paralyzed

'Cause this is thriller, thriller night

And no one's gonna save you from the beast about strike

You know it's thriller, thriller night

You're fighting for your life inside a killer, thriller

Tonight"

Here's what we've seen so far this week...

You Start To Freeze. Not only does October contain a spooky holiday, but it tends to provide some spooky returns, as well. Unfortunately, October is known for its

crashes that just happen to occur in this haunted month. When you survey the crashes that have happened, going back to 1907, they are in the double-digits and average about 16% on the downside. The reason that I highlight these crashes is that the S&P is down this month about 1.5% and you would think the next great recession is upon us. Volatility is the toll we pay to invest, and investing has handsomely rewarded investors thus far in 2025.

Peter Lynch once famously said, "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." We have tools and indicators that help identify financial crises when they are occurring, but seldom if anyone can accurately time a recession or crash - at least consistently. Michael Burry, the hedge fund manager that correctly identified flaws in the U.S. subprime lending market that ultimately led to the 2008 Financial Crisis, sent out a tweet near the beginning of 2023 with only the word "sell." If investors took that advice wholeheartedly, they would have missed out on the S&P 500 Index's return of +65% since that post. As talented as Mr. Burry is, accurately predicting markets is a difficult and sometimes foolish proposition to undertake.

That being said, there are some concerns out there that should get our attention. Most notably, the pullback in regional bank stocks, likely arising from the First Brands debacle. The Cleveland-based auto parts company had looked like a success story after buying several rival brands. However, the company racked up a lot of debt with some potentially questionable practices. Some regional banks and some larger banks made these loans to First Brands that may not actually be recovered. While this is reason for concern among regional banks, the credit markets have not yet reacted as strong to this event as prior events. In March of 2023, the credit spread index jumped more than 30% in two weeks time over the concern in regional banks due to the Silicon Valley Bank, Signature Bank, and First Republic Bank failures. So far, the credit spread index has risen only 17%. The S&P 500 Index sold off nearly 5% back in 2023, yet is down only about 1.5% so far since the news of Frist Brands broke. All of this coincides with a government shutdown that is dragging on and $2.2 trillion in options expiring this week. So, it's a little early to panic just yet.

Cause This Is Thriller! Despite the thrilling and volatile market action we've experienced the last couple of weeks, if history is any guide, it's unlikely that the bull

market is over. According to the last 5 bull markets, we are in a relatively early stage. The average of the last 5 bulls is approximately 7 years, while we only just surpassed year 3. The 2002-2007 bull market is the one example of the 5 that had a lower return than what the current bull market has already produced. No one can pinpoint when this current bull market will end, but if the average is any indication, there are likely a couple of years still left in this current market.

As we've already mentioned, October is typically volatile. However, is it something we should worry about? Economic data would suggest that worrying is premature at this point. Redbook Sales continue to point to a strong consumer. This week's reading was +5.9%, which remains well above average. Unlike in 2008, when sales were trending below average and were actually flat by February, 2008 before going negative.

October is a month in which the VIX (volatility index) tends to rise. Over the last 20 years, the VIX has closed higher than it opened in October at least 55% of the time. So far, the VIX is up 29% in the first half of October. The good news is that November is a month in which the VIX tends to decline. Only in 26% of the last 20 years has the VIX closed higher than it opened in the month of November. With the recent volatility, it's a great time to remind clients to revisit their risk tolerance and goals to make sure they are aligned. Volatility only becomes unbearable when risk tolerance has been abandoned for easy returns.

The famous music video in it's entirety...

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.