Welcome to August: History Says It’s the Worst Month for the Market

Upsetting events have a way of showing up this month and hurting stocks, LPL’s Detrick warns.

T.S. Eliot, a onetime financier, was wrong. For stocks, August is the cruelest month, with September coming in second-worst.

“Maybe it’s the back-to-school blues, but since 1980, there is no month with a worse average return” than August, said Ryan Detrick, LPL Research’s senior market strategist. “The calendar is something we should not ignore.” (For the record, Eliot, the great poet, worked for nine years handling foreign transactions for Lloyd’s bank in London.)

In New York on Wednesday, the market hardly seemed headed for a wasteland. Stocks closed mixed, with the S&P 500 and the Dow Jones Industrial Average down slightly amid news of possibly higher US tariffs on Chinese goods. The tech-heavy Nasdaq Composite, though, advanced 0.46% after Apple disclosed strong third-quarter earnings that took it closer to being the first $1 trillion company.

All well and good, but Detrick pointed out that August has a penchant for producing big events that cause trouble for the stock market. This month in 1990, he recounted, Iraq invaded Kuwait. Stocks tanked. The Asian financial crisis hit in August 1997. Stocks tanked again. And the next year featured the demise of Long-Term Capital Management. Stocks and … well, you know.

Then, August 2010 was vexed by worries over the global economy. And 12 months later, there was the US debt downgrade. Detrick wound up with 2015’s woes over “China currency issues and a 1,000 Dow drop.”

Nonetheless, Detrick said he still expects stock market gains of 10%-plus for 2018. “Thanks to the benefits of fiscal policy and strong corporate profits,” he explained, “suitable investors may consider using any potential late summer weakness as an opportunity to add to risk.”

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