Goldman Sachs has warned investors to buckle up for stock market chaos with price swings of up to 25 percent.
There are already signs that the latest bull rally could be losing its steam with the S&P 200 stocks hitting 52-week highs and plunging by nearly two-thirds since mid-June, according to Investopedia.
October trades have a history of being volatile, according to Goldman records that date back to 1928. Price swings have been seen consistently over the last three decades, with technology and health care being the most volatile groups, Goldman said.
“We believe high October volatility is more than just a coincidence,” John Marshall, equity derivatives strategist at Goldman, said in a note. “We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”
The chaotic stock market is partly fueled by earning season kickoff, which exacerbates a shift in investor sentiment, Marshall said.
“Not only are earnings day moves rising relative to average daily moves, but October tends to be the quarter with the largest absolute earnings day moves for U.S. stocks,” he said.
There are also concerns over investors betting on the next round of the U.S. tariff hikes on China coming up in October.
