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By Simon Avery

This year aside, September has the reputation for delivering the worst stock market performance of the year.

What about October? In addition to the legendary crashes of 1929 and 1987, there were major market dips in October of 1998 and 2002.

October’s reputation is one of volatility, says Colin Cieszynski, market analyst for CMC Markets Canada. The main reason that September has traditionally been the worst month of the year, rather than October, is that Halloween rebounds have usually taken some of the edge off October losses.

“Some of these lows have coincided with the trough of the four-year presidential cycle, which has seen significant uncertainty surrounding U.S. midterm elections,” Mr. Cieszynski said in his market comment Friday. “Often during campaigns, politicians talk protectionism. With the U.S. electorate in a particularly volatile mood this year, and a number of incumbents in jeopardy, the risk of a trade war appears particularly high.”

In fact, just on Thursday, U.S. lawmakers endorsed legislation that would allow companies to seek retribution for lost sales due to undervalued currencies such as China’s yuan.

“Trade wars have had major bearish impacts on markets before. In 2002, for example, the imposition of steel tariffs by President Bush against China and other countries coincided with the start of the final down leg of the 2000-2002 bear market and a peak in U.S. dollar that kicked off a downtrend in the currency that continues to this day,” Mr. Cieszynski said.

Other factors likely to influence trading this month: earnings season, which starts next week; European fiscal, banking and sovereign debt problems; and continuing speculation about further quantitative easing in the U.S. and beyond.

Disclosure: None

Source: Expect Volatility Come October