Volatile Fall

As of today, the U.S. government has not reached an agreement to avert a potential shutdown. The current fiscal year ends on September 30, and funding is set to lapse on October 1 without action from Congress. Since this is not the first time this happens, the market mas be numb for a while and assume that it will get fixed as it always has, but the risk of breaking something in the meantime increases. Coincidentally, October is perceived (in a mix of fact, memory and fiction) as the most volatile month of the year, as you can see below. This seasonal phenomenon initially comes from the time where the U.S. economy was mostly based on agriculture and farmers borrowed money in spring for planting and returned it, weather permitted, in the fall, after harvesting. The 1929 crash and 1987 black Monday both happened on October, and investors know that, making it perhaps a self fulfilling prophecy. Currently, it has more to do with the 3Q earnings season and other geopolitical factors than anything else, but the fact that we start the month with a disfunctional government, might spice things up, at a time where things are already hot enough.

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