August Almanac & Vital Stats: Stronger in Election Years By: Jeffrey A. Hirsch & Christopher Mistal | July 18, 2024 | Email | Print

Agriculture made August a great stock market month in the first half of the Twentieth Century. It was the best DJIA month from 1901 to 1951. Now it is the worst DJIA and second worst S&P 500, NASDAQ, Russell 1000, and Russell 2000 month over the last 36 years, 1988-2023 with average performance ranging from 0.1% by NASDAQ to a –0.9% loss by DJIA. In 2022, DJIA, S&P 500, NASDAQ, and Russell 1000 all declined over 4% in August and in 2023 they declined 1.8% or more. 

 

Contributing to this poor performance since 1988; the second 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 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, 2015 and 2022 of over 4% by DJIA have widened its August average decline.

 

 

However, in election years since 1950, Augusts’ rankings improve: #4 DJIA, #5 S&P 500, #1 NASDAQ (since 1971), #1 Russell 1000 and #2 Russell 2000 (since 1979). Average election year performance ranges from a modest 1.1% by DJIA to a solid 3.5% from Russell 2000. The last election year with sizeable across the board August losses was 1992. In 2004 and 2016, August was mixed. Some of these historical August gains may have been pulled forward already this year.

 

 

Historically, the first eight or nine trading days of the month have exhibited weakness while mid- and late month has been somewhat better. This pattern does not exist in election years. In election years, August has opened strongly with gains accumulating through the seventh trading day before a brief bout of mild weakness followed by additional gains through the end of the month. With fewer years of data, August election-year strength in recent years is more pronounced by NASDAQ, Russell 1000, and Russell 2000. One likely reason for such a strong shift in August performance in election years is the fact that the top candidates are known and confirmed.

 

On Monday of monthly options expiration DJIA has been up 19 of the last 29 years with four days up more than 1%. Monthly expiration Friday has been mixed recently with 18 declines in 34 years. More recently, DJIA has been up in five of the last six years after declining in seven of the previous eight. In monthly expiration week, DJIA is down 21 times in 34 years since 1990, with some sizable losses; –2.6% in 1990, –2.3% in 1992, –4.2% in 1997, –4.0% in 2011, –2.2% in 2013, –5.8% in 2015, and –2.2% in 2023. The week after expiration is stronger, DJIA up 20 of the last 33.