It's that crazy month again.
In October, investors have historically witnessed above-average volatility and average returns.
October is known for spectacular stock market crashes (1929, 1987, and 2008), but in reality the month ranks about average in terms of market returns.
What the month of October really should be known for is volatility. Incredibly, no month has seen more 1 percent changes (up or down) than the month of October for the S&P 500 going back to 1950, according to data from LPL Research.
Pullbacks are normal, investors say. And you can put some ballast against equities in a portfolio using fixed income.
During the last big sell-off, in February 2018, "we got a lot of phone calls from clients. Talking about volatility is different than living it. The psychology is quite naturally like the sky is falling. But we're telling investors they just need to winterize portfolios. We're taking down some high-yield bonds, but we're not selling out entirely," said Tracy Maeter, head of investments at JPMorgan Private Bank in Philadelphia.
The trigger for another sell-off may be politics and elections in November, but again, that won't be a surprise.
"We're always a little cautious about how much we talk about politics. We expect a lot of noise and volatility around this time. It's unlikely the outcomes are dramatically changing the growth and earnings prospects for companies. We don't see an upset that changes our fundamental growth and company prospects," Maeter added.
Interest rates are more in focus for professional investors. Maeter said she expects the 10-year Treasury bond to yield 3.10 percent for the year-end, and 3.35 percent by the third quarter 2019, about a year from now.
The recent pullbacks are good for the market and temporary, according to Hank Smith, chief investment officer with Haverford Trust.
"We're not near the ninth inning of this bull market yet," he said, because small-business confidence is at an all-time high, unemployment ranks at a 40-year low, and weekly jobless claims are at a 50-year low.
The market is self-correcting potential excesses, and by any measure (one, three, and five years), performance has been unsustainable, "so it's good to get some pullback."
"We view the Fed's interest rate increases as proof of a strong GDP. We're not fearful that the Fed is behind the eight ball with respect to inflation. Inflation is healthy, but not too high that we need to worry about it," Smith added.
As midterm elections approach, investors are closely following the outcome in the House and Senate. If Democrats win the House and the Republicans maintain dominance over the Senate, the market will be pleased with the status quo. However, if the percentage of Republicans in the Senate drops, there will potentially be a swift sell-off, which Smith views as a buying opportunity.