Oh, Swell: August Is the Worst Month for Stocks

Bad things tend to happen this month, which tank the market, LPL’s Detrick warns.

August is one rotten month for stocks. That’s the warning from Ryan Detrick, LPL Research’s senior market strategist. In fact, it’s the worst month of them all.

Consider all the bad stuff that has happened in the eighth month, slamming stocks. Iraq invaded Kuwait in August 1990. The Asian currency mess appeared in August 1997. And 12 months later, Russia’s debt default hit. Standard & Poor’s downgraded federal debt in August 2011. Then in August 2015 came the Chinese currency crisis, which resulted in the only 1,000-point drop in the Dow Jones Industrial Average, Detrick noted.

This August, we have an escalation of the trade war, with President Donald Trump threatening new tariffs on Chinese exports and Beijing devaluing the yuan. More encouraging news allowed the stock market to retrace its losses last week. The S&P 500 is up 16.4% for the year. But who knows what will occur next? We have three weeks to go.

The S&P 500 has been down an average of 0.78% in August over the past 10 years, worse than any other month, according to Detrick’s data. Further, the index has been down an average of 0.05% in August since 1950, and only September was worse.

“August has been tough on stocks historically and is actually the worst month of the year over the past 10 years,” explained Detrick. “Additionally, don’t forget this is a pre-election year.” The third year of a president’s term usually is the best one.

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