Goldman Sachs has warned of volatility in October. It has advice for investors

Goldman Sachs warned of a surge in market volatility in October: historically, the S&P 500 index fluctuates about 20% higher in this month than at other times. Amid expectations of a new Fed decision, the risk of a U.S. government shutdown and a busy calendar of corporate events, the bank advises using short-term options on days when significant news is released. Goldman's team highlighted several events over the next four months that could trigger sharp stock moves.

Goldman Sachs analysts drew attention to the traditional increase in volatility in the market in October, Bloomberg reports. According to calculations of the investment bank's derivatives team, since 1928, the volatility of the S&P 500 index in this month was on average 20% higher than in other months. It has increased even more in recent decades as the corporate triggers that saturate the fourth quarter have taken on a more prominent role.

"October volatility is not just a coincidence. It's a critical period for many investors and companies, who start evaluating results with an eye on calendar year results. This pressure increases trading volumes and volatility as investors keep an eye on financial reports, top executives meeting with analysts and business forecasts for next year," said Goldman's head of derivatives research, John Marshall.

The market is now under pressure from expectations of the U.S. Federal Reserve's next rate decision, as well as the growing threat of a government shutdown starting Oct. 1, Bloomberg writes. Risks of increased price fluctuations are growing as options traders have begun preparing for a year-end rally and are no longer hedging against market declines, counting on further rate cuts.

To make money on seasonal fluctuations, the bank's analysts recommend buying short-term options for specific days with catalysts and refrain from such deals in quiet sessions without news, Bloomberg writes. Goldman's data show that the upcoming reporting season usually brings the largest stock movements for the whole year exactly in the days of presentation of results, the agency points out.

The Goldman Sachs team named several major events, in addition to company financial statements, that could cause significant price movements in the U.S., Europe and Asia over the next four months, including, for example, the Victoria's Secret show in mid-October, the Dior show during Paris Fashion Week, Tesla's annual shareholder meeting, and corporate events at Hyatt Hotels, Home Depot and Dollar Tree. A significant part of the list was taken up by data publications of companies from the healthcare sector.

"We view each of these events as an opportunity to play volatility. The list is focused on the biggest events that we will be targeting for directional options trading opportunities," Marshall wrote.

This article was AI-translated and verified by a human editor