A sea of red ink: Tallying the damage October wrought

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October cemented its historic reputation for generating extreme investor grief. This one will be remembered right up there -- or down there -- with 1929 and 1987.

As fears of financial and economic Armageddon surged, asset values dived across the board this month.

Stocks and commodities plunged worldwide. Most bonds also lost value, except for shorter-term government securities.

Diversification helped only in a very relative sense: The Dow Jones industrial average sank 14.1% for the month, which was a good performance only compared with the 23.8% plunge in Japan’s Nikkei 225 index.

The accompanying chart tells the grim tale.

This week, however, looked and felt better, after one more big sell-off Monday drove most U.S. stock indexes to new 5-1/2-year lows.

On the New York Stock Exchange, rising stocks have outnumbered losers for each of the last four sessions, a streak that is highly encouraging to market bulls.

The credit markets are improving, if at a snail’s pace. Governments worldwide have pumped trillions of dollars into the global financial system to halt the meltdown that appeared imminent at the start of the month.

Still, the economic fallout from the credit crunch and the crash in asset values has just begun, as a serious recession seems unavoidable. (Note today’s grim economic data.)

And a huge event for investors looms: Tuesday’s election.

The same question is on everyone’s mind: Is the worst over for markets?

Given how wrong so many veteran Wall Street players have been all year long about the outlook, your guess now is as good as theirs -- or maybe better.