What is it about October that brings out the fear in traders? It seems to happen with regularity for there to be no connection at all; but on the other hand, each of the major October stock market surprises has had its own unique circumstances.

Part of it presumably has to do with the fact that professional investors think in terms of calendar year performance. If some cataclysmic economic or geopolitical event occurs that could change the outlook of the market, portfolio managers are systematically hard-pressed to make dramatic decisions versus say, March or April, where they have more time to ride out a potential price storm. “Sell first and ask questions later” is often the first psychological response when it comes to dealing head on with the vagaries of October.

For the better part of this year, the market has put in a pretty steady performance—up over 13%–without breaking ...