During the month of October 2011 the Dow Jones Industrial Average index (Dow) increased by 9.6%.
Since October 1928, 997 months have passed, just over 83 years. During this time frame the Dow has only managed to increase in value by more than 9.6% within a calendar month, 27 times. Of these 27 instances, 15 occurred between 1928 and 1939.
The October 2011 return of 9.6% was the highest since October 2002 when the index returned 10.6%.
In order to appreciate the rarity of the October 2011 return on the Dow, the following chart plots all returns from October 1928 to October 2011. The monthly returns are ordered from the worst return, -30.7% during September 1931, to best return, 34.8% during August 1932. They are shaded red if the Dow decreased and positive if it increased. The dashed lines point to the monthly returns during the course of 2011. The dashed line that is the farthest to the right points to the October 2011 return of 9.6%.
Click image for larger view
The above chart illustrates that the monthly returns for 2011 thus far have been outside of the range of the middle third of historical returns. The monthly returns during August and September, respectively -4.3% and -6.0%, placed these months in the bottom 1/6 of all returns since 1928. Three other monthly returns, May, June and July, all fell in the bottom third of monthly returns.
With the Dow providing a wide dispersion of monthly returns this year, it is interesting to look back at the last 15 years to see how previous years stack up against 2011.
Click on the following link to view a time lapse video of monthly returns from 1995 to 2011. Pay particular attention to how the distribution of monthly returns (dashed lines) in some years are clustered in the middle and in other years bar-belled like 2011.
(for best viewing of video, right click on link and select “open in new tab”)