Money flows from harvesting made August a great stock market month in the first half of the Twentieth Century. It was the best month from 1901 to 1951. In 1900, 37.5% of the population was farming. Now that less than 2% farm, August is amongst the worst months of the year. It is the worst DJIA, S&P 500, and Russell 2000 month over the last 33 years, 1988-2020 with average declines ranging from 0.4% by Russell 2000 to 0.8% by DJIA. For NASDAQ August ranks second worst over the same period with an average gain of 0.2%.
Contributing to this poor performance since 1987; the second shortest bear market in history (45 days) caused by turmoil in Russia, the Asian currency crisis and the Long-Term Capital Management hedge fund debacle ending August 31, 1998 with the DJIA shedding 6.4% that day. DJIA dropped a record 1344.22 points for the month, off 15.1%—which is the second worst monthly percentage DJIA loss since 1950. Saddam Hussein triggered a 10.0% slide in August 1990. The best DJIA gains occurred in 1982 (11.5%) and 1984 (9.8%) as bear markets ended. Sizeable losses in 2010, 2011, 2013 and 2015 of over 4% on DJIA have widened Augusts’ average decline.
In post-election years, Augusts’ rankings are little changed. August is the worst month for DJIA and second worst for S&P 500, NASDAQ and Russell 2000. Average declines in post-election year Augusts swell to 0.8% by Russell 2000 to 1.7% by DJIA. Each index has also seen more declining post-election year Augusts than positive.
The first nine trading days of the month have exhibited weakness while mid-month is better. Note the bullish cluster from August 16 through 20. The end of August tends to be weaker when traders evacuate Wall Street for the summer finale. The last five days have declined in 13 of the last 25 years with the S&P 500 up only eight times on the penultimate day in the past 25 years. In the last 25 years, the last five days of August have averaged losses of: Dow Jones Industrials, –0.7%; S&P 500, –0.5% and NASDAQ, –0.04%. Since 2014, the last five days have been improving with only one loss by DJIA, S&P 500 and NASDAQ.