The stock market is on track to offer another solid month’s return after falling nearly 20% this spring.
In July, the S&P 500 returned 3%, and the technology-rich NASDAQ has risen 3.6% so far, bringing the total return of these indexes since April 9, when President Trump suspended many tariffs until July 25.
In particular, the S&P 500’s annual return rate has been around 11.6% over the past 50 years. This is very impressive.
It remains to be seen whether the S&P 500 will continue to climb in August and earn a fifth consecutive month of profit. Given that the ratings are undoubtedly growing and some emotional measures appear to be bubbling, the current gathering may be a bit long in the teeth.
Longtime market analyst Jeffrey Hirsch also notes that the August isn’t necessarily stock friendly, as he is behind the closely monitored yearbook of stock traders.
According to the Stock Trader’s Yearbook, the stock market has historically experienced a tough seasonal tailwind in August. Bloomberg & Sol; Getty Images
Stocks move up and down for a variety of reasons, including economic changes, revenues, and revenue growth outlook.
But stocks tend to work well in one month, as well as Almanac, a stock market, which has been tracking since Jeff Hirsch’s father, Yale Hirsch, was founded in 1967.
Yearbooks are a treasure trove of historical probability and provide insight into historical indicators and sector performance trends.
Yale Hirsch is believed to have identified the popular Santa Claus Rally. We believe this is a sign that stocks tend to rise on the last five trading days of the year and the first two trading days of the following year, suggesting that the January barometer in January leads to profits over the year.
One of the Almanac’s most closely considered trends is the average monthly return, with performers historically solid inventory in July, but the background is less friendly in August.
“August is the worst post-election month for the DJIA and Russell 1000, and the second worst of the S&P 500, NASDAQ and RUSSELL 2000,” writes Jeff Hirsch. x.
Looking back at 1950, the major market index recorded negative returns in August, making it one of the worst months for stock market returns.
“The average decrease in August after the election ranges from –0.5% to –1.5%. Each index does not have a positive decline in August after the election,” says Hirsch.
Unless otherwise stated, the average August returns for each major index since 1950 are as follows:
Dow Jones Industrial Average: 1.5% decrease
S&P 500: 1.2% decrease.
NASDAQ (since 1971): 0.8% decrease.
Russell 1000 (since 1979): 1% decrease.
Russell 2000 (since 1979): 0.5% decrease.
The inactive performance of these indexes in August ranks the 11th or 12th worst of all months of the year.
The stock market has been perfect for that these days. Sold out this spring will take a lot of excess from stocks and set the bar low enough to make the shy of terrible news look like a victory.
However, given the undoubtedly expanding the ratings of the S&P 500, it needs to continue to go almost completely to continue.
According to FACTSET, the one-year-old price-to-return ratio for the S&P 500 is a general valuation measure that divides the price by the expected revenue. That’s about the February location when the stock peaked before the tariff-driven sale.
How trade transactions with global partners like the EU are shaking can go a long way in determining whether the economy really hampers the recession. President Trump extended the suspension in early July with many mutual tariffs, but suspended the August 1 hard stop date.
If trade transactions lack expectations, the economy could rethink how tariffs affect inflation, and later this year could put pressure on market rallies.
Similarly, most people expect the Federal Reserve to cut interest rates in September. So far, there is little economic data to suggest that it is necessary.
Consumer Price Index (CPI) inflation was relatively ti-ill at 2.7% in June. This is higher than the Fed hopes, but it’s still down from 3% in December.
If unemployment rate recovers by September, the Fed could cut its fees by a quarter point. The unemployment rate is 4.1%, which is about places that have been moving since last summer.
If data remains as is in sticky inflation and stable job markets, the Fed may decide that it can wait longer before cutting. It can hurt stocks as fuel expansion and revenue growth decreases.
For most investors, monthly seasonality should not affect long-term investment plans.
However, investors who consider active day and position traders may want to pocket some of their recent profits and collect a bit of cash in case a stock has had a better chance of buying in August.
After all, the stocks will rise over time, but don’t do that in a straight line. There are many jigs and zags along the way.
