August has a reputation as a volatile month, and it sure delivered this year. After nearly two months without a 1% close higher or lower for the S&P 500 Index, market turbulence re-surfaced in August. Over the past month, we’ve not only seen the worst three days of the year, but many 1% swings in both directions.
The good news is August is finally coming to a close, but the bad news is that September is next. Since 1950, September has been the worst month for the S&P 500 Index, which has dropped an average of 0.5% during the month. September’s track record has been a little better recently: Over the past 10 years, the S&P 500 has averaged a 0.9% gain. Nonetheless, we continue to expect volatility to continue, especially since more defensive areas of the market are leading right now.
“August was a burst of volatility for most investors, and we expect that to continue in September,” explained LPL Financial Senior Market Strategist Ryan Detrick. “But if you’re looking for some good news, the past 15 times stocks were lower in August, the rest of the year was actually higher every single time.”
A rough August has been typical, and history shows stocks have overcome the volatility through the rest of the year. As shown in the LPL Chart of the Day, Why Lower Stocks In August Could Be Bullish, returns the rest of the year have been quite normal after a down August. To reiterate, the rest of the year has been higher the past 15 times the month of August was lower.
Please see the Midyear Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets for additional description and disclosure.
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