John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial
August has been one of the worst months for the stock market historically. In fact, it has been the worst month on average for the past 10 years, with the S&P 500 Index down an average of 0.78% for that month [Figure 1]. Last week’s 3.1% slide for the index certainly fit that pattern, which begs the question whether investors should buckle up for more seasonal losses this month. Despite last week’s losses, 2019 has been a good year for stocks — the S&P 500 is up 17% year to date through August 2 and, excluding any losses Monday, still stands just 3% from its all-time closing high on July 26. Here we summarize August’s lackluster track record and discuss whether this August will fit the pattern.
LATE SUMMER LULL
We have some painful August market memories: most recently, the Chinese yuan crisis in August 2015, which sent the Dow Jones Industrial Average down 1,000 points in one day. Prior to that, rating agency Standard & Poor’s downgraded its credit rating on U.S. debt in...