Traditionally, August is not the Best Month to Invest

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It has been a trying time for global stock markets recently. China went as far as freezing some foreign accounts to curb “malicious” short selling in the hope of propping up its ailing stock market, Greece’s stock market opened after five weeks and immediately fell by a fifth of its value, and many other markets were forced to cancel trading in order to keep prices from falling too fast.

Historically a Poor Month

When looking insight and reasons to invest, people tend turn to historical patterns to see what the future might bring. Unfortunately, if you were to look at the past twenty years predictions, then August does not look like a good month to invest in. For the last two decades, the eighth month of the year has on average, been the worst for stock returns. Not only is August generally poor, but the decline tends to be more severe than in other months, averaging a loss of 4.7% for the last nine years.

Breaking Patterns

If you only look at the August’s pattern, this year’s does not look bright. However, this year has been breaking patterns of stock market behavior since the beginning of the year. A usually very strong January was significantly down, while February saw a sharp rebound instead of its usual decline.

Even March, which is traditionally one of the strongest months over the long term, ended up being significantly down. Several more sweeping predictions, usually only reserved only for the brave are not turning out as expected either. Stocks have never been down in a year which ends with a five, and the third year of a presidential mandate is normally quite strong.

Basically, August might turn out to be a surprise as well, shaking the US stock market from its current stalemate. With the Dow Industrials’ total return up only half a percent for the year, and the S&P 500 finishing July only a single point up from its close at the end of February, there is more room for gains than losses this month.

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