August Almanac: Worst Month By: Jeffrey A. Hirsch & Christopher Mistal | July 19, 2018 | Email | Print

 

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. DJIA dropped a record 1344.22 points for the month, off 15.1%—which is the second worst monthly percentage DJIA loss since 1950. Saddam Hussein triggered a 10.0% slide in August 1990. The best DJIA gains occurred in 1982 (11.5%) and 1984 (9.8%) as bear markets ended. Sizeable losses in 2010, 2011, 2013 and 2015 of over 4% on DJIA have widened Augusts’ average decline. A strong August in 2014 of S&P 3.8% and NASDAQ 4.8% preceded corrections of 7.4% and 8.4% respectively from mid-September to mid-October.

 

 

In midterm years since 1950, Augusts’ rankings improve slightly: #8 DJIA, #9 S&P 500, #11 NASDAQ (since 1974), #7 Russell 1000 and #11 Russell 2000 (since 1982). Average losses range from 0.1% for Russell 1000 to 1.9% for Russell 2000. DJIA suffered double-digit losses in 1974, 1990 and 1998.

 

The first nine trading days of the month have exhibited weakness while mid-month is strongest. Note the bullish cluster from August 15-17. The end of August tends to get whacked as traders evacuate Wall Street for the summer finale. S&P 500 has been up only six times on the next to last day in the past 22 years. In the last 22 years, the last five days of August have averaged losses of: Dow Jones Industrials, –0.9%; S&P 500, –0.8% and NASDAQ, –0.4%.

 

On Monday of expiration the Dow has been up 16 of the last 23 times with four up more than 1%, while on expiration Friday it has been down seven of the last eight years (–3.1% in 2015). Expiration week as a whole is down slightly more than half the time since 1990, but some of the losses have been steep (-2.6% in 1990, -2.3% in 1992, -4.1% in 1997, -4.0% in 2011, 2.2% in 2013 and 5.8% in 2015). The week after expiration is mildly stronger up 17 of the last 28.