Money flows from harvesting made August a great stock market month in the first half of the Twentieth Century. It was the best month from 1901 to 1951. In 1900, 37.5% of the population was farming. Now that less than 2% farm, August is amongst the worst months of the year. It is the worst DJIA and S&P 500 month since 1987 with average declines of 1.0% and 0.8% respectively. Due to healthy gains in 2012 by NASDAQ and Russell 2000, August has modestly improved; now second and third worst respectively.
Contributing to this poor performance since 1987; the shortest bear market in history (45 days) caused by turmoil in Russia, the Asian currency crisis and the Long-Term Capital Management hedge fund debacle ending August 31, 1998 with the DJIA shedding 6.4% that day. The Dow dropped a record 1344.22 points for the month, off 15.1%—which is the second worst monthly percentage Dow loss since 1950. Saddam Hussein triggered a 10.0% slide in August 1990. The best Dow gains occurred in 1982 (11.5%) and 1984 (9.8%) as bear markets ended. Sizeable back-to-back declines in 2010 and 2011 have widened Augusts’ average losses.
In post-election years since 1953, Augusts’ rankings barely budge: #12 DJIA, #11 S&P 500, NASDAQ (since 1973), Russell 1000 and #10 Russell 2000 (since 1980). Average losses range from 0.4% for Russell 2000 to 1.6% for DJIA. NASDAQ has gained ground in just three of the last ten post-election year Augusts (1989, 1993 and 2009)
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By Christopher Mistal & Jeffrey A. Hirsch
