Interesting chart. September looks scary as hell! Should we get the heck out before it comes?
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On Wed, 8/5/15, sarah_oz@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:
Subject: [TSP_Strategy] Why August Gets No Respect
To: TSP_Strategy@yahoogroups.com
Date: Wednesday, August 5, 2015, 10:30 AM
Opinion: Why August gets no
respect from investors
By
Mark
Hulbert
Published: Aug
4, 2015 5:30 a.m. ET
It turns out that the sleepy summer month has one of
the best average returns
Courtesy Everett Collection
Rodney Dangerfield became famous for
complaining he got 'no respect.' He could have been
talking about August
in the stock market.
CHAPEL HILL, N.C. (MarketWatch) — August is the
Rodney Dangerfield of the calendar: It gets no respect.
That's surprising. Since the Dow Jones Industrial
Average
DJIA,
+0.02%
was created in the
late 1800s,
August has been one of the best-performing months. Its
average gain is
even better than January's, and yet Wall Street celebrates
January's
strength by naming a seasonal pattern for it: the January
Effect. Yet no one has ever heard of an August
Effect. Why not? The
answer is that most investors' memories are too short to
remember years
past in which August turned in spectacular performances.
With a myopic
focus only on recent decades, August does indeed appear to
be one of the
worst-performing months. The accompanying chart
tells the story.
Notice that
August's average
return turns from positive to negative upon shifting the
time horizon
from the Dow's entire history to just the period since
1955. The
only way August deserves its bad reputation would be if
something
fundamental changed between the early part of the last
century and more
recent decades that affected August's performance. I am
unaware of any
such change. To be sure, when in past years I've
written about
August, many readers submitted hypotheses that attempt to
explain why
the stock market's August return would be so much better
in the earlier
part of the 20th century than in recent decades. But none
withstands
statistical scrutiny. For example, many suggested
that August is a
casualty of the shift of the U.S. economy away from an
agrarian
economy. But why? August comes well after the point at which
farmers
would have had to pull money out of the market to pay for
planting. Another
suggested hypothesis was that the culprit was the 1976
change in the
federal government's fiscal year end from June 30 to Sept.
30. But,
again, it's not obvious why that should have any impact on
the stock
market in August — and, in any case, the month's average
performance
does not fall off a cliff beginning in that year.
When
contemplating whether a statistical pattern is worthy of our
attention,
it's crucial to see if it exists in other periods besides
the one that
is the basis of its reputation. Because August's poor
performance in
recent decades isn't replicated in the early part of the
past century,
we know that the month's bad reputation isn't
deserved. Other
months are a different story. The stock market's average
gain in
January, for example, is almost identical regardless of
whether we focus
on the entire period since 1896 or only since 1955.
Notice
carefully, however, the story that the chart tells about
September. Its
average is a big loss, regardless of the time period. That
suggests that
we make hay while the sun shines: Labor Day is just four
weeks away!
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