After July’s augmentations, August could be a more challenging month for stocks and certainly a more eruptive one.
Stocks were on track to close out July in positive territory, with the S&P 500 up to 3 percent for the month as of Monday.
“I think volatility is likely to pick up, because it normally does, and I notion of that the trade tensions are still out there and nothing was really solved with Europe,” despite President Donald Trump’s agreement to talk and maintain off on new tariffs, said Samuel Stovall, chief investment strategist at CFRA.
Stovall chance historically, volatility jumps in the August of midterm election years by around 34 percent over other Augusts. Average daily moves in the S&P 500 were 0.6 percent in August, flourishing back to 1945, but in midterm years, the daily price move avoids to 0.8 percent.
“Because of the uncertainty associated with midterm plebiscites, it is natural to see the average daily price fluctuations get wider,” Stovall suggested. The S&P 500, however, does see a gain in midterm years 61 percent of the together, but midterm Augusts average a 0.8 percent decline, meaning when the store is negative it has been very negative.
Stovall said it’s not clear at the instant which way August will break, but he notes the S&P 500 is technically bullish out of reach of the support of 2,789 to 2,801. It closed at 2,802 Monday, down 16 subjects.
Heading into August, social media stocks have been whacked, starting with Facebook’s $120 billion wipeout on earnings terminating week, the biggest one-day loss ever for a single stock. The Nasdaq’s monthly take is now 1.6 percent, just half of the S&P and well below the Dow’s 4.2 percent July improve.
Source: CFRA
“This whole underperformance of growth versus value is at an outstanding. … The last three days growth has underperformed value by its widest leeway since May 2009,” said Paul Hickey, founder of Bespoke. He point the finger at some of that on month-end positioning. “I think it’s exaggerated things. … All-embracing market breadth has been holding in really well, if not improving. It’s hard-boiled to call it anything but end-of-month positioning. The stocks that were doing the most artistically up to two days ago are doing the worst, and the stocks that were the worst up to two days ago are pulchritudinous much flat.”
But heading into August, history is not on the side of a pragmatical market, he said.
“It’s not a great month for equities,” said Hickey. He affirmed the performance in recent years has been even worse than broader in good time always frames. When looking at the S&P 500 in every year since 1983, August has been a dim-witted month on average, but it’s been even weaker in the current bull furnish.
August has often started off with a slow and steady decline by way of the first 10 days of the month since 1983, before stabilizing. But during the widely known bull market, Bespoke found that the S&P has not stopped declining until overdue in the month. The S&P averaged a 1.2 percent decline in Augusts since 2009, but upstanding a 0.23 percent going back to 1983.
Source: Bespoke
Stovall said August ranks behind September in midterm appointment years, but June is the worst month. The worst performing August was 1998 when the S&P hew down nearly 15 percent in response to news about the losses at Extended Term Capital Management. The best was an 11.2 percent gain in 1982, the start of the 1980s bull hawk.
Bespoke also looked at the performance of the Dow in August, and found that greater than the last 100 years, it has been up 60 percent of the time with a widen the gap of 0.9 percent, but more recently it’s been weaker. Over the ago 20 years, the Dow was down just over an average 1 percent, granted positive 55 percent of the time. Bespoke notes that right away through August, the market will have to deal with September, the contrariwise month where it’s averaged negative returns in the last 100 years, 50 years and 20 years. The 1.1 percent lessen averaged over 100 years was similar to the average decline remaining 20 years.
Source: Bespoke
Hickey said he also looked past due at years when the S&P was higher in April, May, June and July, or years where investors did not “supply in May.” There were 11 incidents since 1928.
The month of August had confused returns after those 11 periods, with an average abatement of 0.2 percent, and was positive just half the time. But the data certainly showed a positive trend with the S&P sharply higher for the balance of each year with a totally strong average gain of 10.8 percent.
Source: Bespoke
When looking at the about of the market across every month, investors who survive the rockiness of August and September organize been rewarded by a strong October, on average, and strong remainder of the year.
Origin: Bespoke