October is not a great month for stocks. Perhaps the reason for that is October is the month in which some of the most memorable and horrific market events have taken place. That includes infamous crashes in 1929 and 1987 along with a 554-point Dow plunge in 1997 and the market plunge in October 2008.
October has a frightful history of market crashes and only ranks midpack in post-election years. Should a meaningful decline materialize in October it could prove to be an excellent buying opportunity,” according to the Stock Trader’s Almanac.
On the bright side, the tenth month of the year is the last month in the worst six-month cycle for stocks. The even better news is that this month has proven to be a good time to scoop stocks and ETFs in one this year’s top-performing sectors: Health care. Year-to-date, the Health Care Select Sector SPDR (NYSEArca: XLV) is the second-best of the nine sector SPDR ETFs with 28.5% gain, placing it behind only the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY). [Earnings Reports Could Revive Health Care ETFs]
The Vanguard Health Care ETF (NYSEArca: VHT), which is slightly cheaper than XLV with an expense ratio of 0.14% compared to XLV’s 0.18%, has been even better with a year-to-date gain of 30%. As the Stock Trader’s Almanac notes, the end of October is a good time to establish long positions in the health care providers sub-industry with the middle of the month being a fine time to consider pharmaceuticals names. [Health Care ETFs Trouncing S&P 500 in 2013]
XLV allocates 44.9% of its weight to pharmaceuticals names like Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE). The ETF also features a 16.1% weight to health care providers and services firms, according to State Street data.