The stock market usually gains in the fourth quarter. Why October is a bad start.

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October marks the start of the fourth quarter, and often a strong three months for the stock market. But this start is shaky – a warning that investors should not ignore what the rest of the year may bring.

A red flag is not a red corn: the

Standard & Poor’s 500

It’s up 79% from the fourth quarters since 1950, according to strategists at Trust Commercial Bank. The average movement was 4% in gains.

But on Monday, the first full trading week in October begins S&P 500 sold out!—Like what happened for most of September. The index ended the day 1.3% lower.

The reasons are many, but let’s start with more history.

After a bad September – the S&P 500 fell 5% last month – a usually bad October follows. The index gained only 54% from October. On average, the September drop translates to an October loss of 0.4%, according to Bank of America.

Then, there is the hard fact that the market is about to correct – a drop of 10% or more. Prior to last week, the S&P 500 hadn’t closed more than 5% below its all-time high in a year.

“I don’t think we’ve seen the bottom yet in stocks,” wrote Jay Pestricelli, CEO of ZEGA Financial. “While the September stock market declines were uncomfortable, they were far from a traditional 10% market correction.”

Now consider the risks to the economic fundamentals and the companies lurking in the background.

Inflation will not go away. Rising material and labor costs – driven in part by a lack of supply – are Reduce profit margins for some companies. For the broader market, higher prices have gone up The possibility of the Federal Reserve raising short-term interest rates next year. If the Fed raises interest rates, the economy may grow more slowly, especially since inflation is already eroding economic demand.

“Inflation is already rising and it is an illusion [the Fed] “Markets are generally nervous until there is a clear picture of what the Fed will actually do,” says David Miller, co-founder and chief investment officer at Catalyst Capital Advisors.

Finally, beware of rLong-term bond yields. Federal Reserve Chairman Jerome Powell has indicated that the central bank will likely begin to “taper”, or reduce monthly bond purchases, before the end of the year.

Decreased money moving into the bond market lowers bond prices and increases their yields. This makes future profits less valuable. Indeed, the average one-year forward gain on the S&P 500 is 20 times, down 22 times it recorded earlier in the year.

So takeaway? Let history be evidence – and let the dust settle on the underlying risks.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com