October has ended six of 13 bear markets. This year the bear hides inside a record

S&P 500 bear markets since 1946, by the month in which they ended. Source: Yardeni Research; falls of 20% or more in the S&P 500 at the close. There have been 13 since 1946, the last ending on 12 October 2022.

Jan	0
Feb	0
Mar	2
Apr	0
May	1
Jun	2
Jul	0
Aug	1
Sep	0
Oct	6 (1946, 1957, 1966, 1974, 2002, 2022)
Nov	0
Dec	1

Source: Yardeni Research; falls of 20% or more in the S&P 500 at the close. There have been 13 since 1946, the last ending on 12 October 2022.The Macro Notebook

October is known for its crashes, but its record is better at endings. Of the 13 bear markets in the S&P 500 since 1946, falls of 20% or more, six ended in October, according to tables kept by Yardeni Research. No other month has more than two. The last one ended on 12 October 2022.

That record is being passed around again this month as a reason to buy beaten-down shares. This year it has a problem: there is no bear market in the index for October to end. The S&P 500 closed on 2 October 1.0% below its record of 13 August. We wrote last week that it has barely noticed the oil shock. The bear market is inside it. On the same day, 182 of its 500 stocks were 20% or more below their highest close of the past year, the Trading Time Machine newsletter counted. PepsiCo is one of them.

Why October

The idea is old. The Stock Trader’s Almanac coined the term “bear-killer” for October in 1968. Its explanation is about the funds: tax selling, end-of-quarter window dressing and portfolio changes weigh on September and October, and October falls just before November, December and January, which the Almanac counts as the strongest three months of the year.

Six out of 13 is more than chance would give. If the lows fell at random, about one would land in each month. But the record describes the past, and a low is a low only in hindsight. October also holds the crashes of 1929 and 1987, and the peak of 9 October 2007, which began the deepest bear market since 1932. A calendar can show where lows have been. It cannot show where this one is.

A bear market inside a record

The damage is uneven. In consumer discretionary, 60% of the stocks are in a bear market; in energy, 19%. In consumer staples, the defensive end of the market, it is 42%.

The same newsletter tested what such stocks did next. From 1991 to 2025, shares 20% or more below their high while the index was near a record returned 6.9% on average over the following year, against 12.8% for the index. The exception came when 30% or more of the index was in a bear market at once, as now. Then the beaten-down stocks beat the index by 10.7 percentage points. But that happened in only 10 months, in 1998 to 2000 and in 2020. A rule built on ten months is a thin one.

The PepsiCo test

PepsiCo shows what the calendar leaves out. Its shares closed at $125.60 on 1 October, the lowest since April 2020, Nasdaq’s price history shows. They are down 12.3% this year, while the index is up 12.8%, and 26% below their February high.

The case for buying rests on the dividend. PepsiCo raised its annual dividend by 4% this year to $5.92 a share, its 54th rise in a row. At $125.89, the close on 2 October, that is a yield of 4.70%. That is more than cash pays: the Fed raised its target range to 3.75% to 4.00% on 16 September.

But a buyer who plans to hold for ten years should compare the dividend with a ten-year bond. The 10-year Treasury yield was 5.28% on 2 October. The buyer gives up 58bp of safe income today, in the hope that the dividend keeps rising and the shares recover.

That depends on North America. In the second quarter, PepsiCo’s North American foods business kept its volume flat, helped by what the company calls affordability initiatives. Effective net pricing fell 2%, net revenue fell 2%, and core operating profit fell 8% in constant currency.

Our view

October may end this bear market too, one stock at a time. But the calendar is a poor reason to buy. A share is cheap because of its price against what the company earns, not because of the month. A dividend yield below the yield on a 10-year Treasury is a bet on growth, and for PepsiCo that means North American snacks selling more without further price cuts. October will not do that for it.

The first test comes on Thursday 8 October, when PepsiCo reports its third-quarter results at about 6:00 in New York, 12:00 in Tirana. The numbers to watch are North American volume and pricing, not the date.