Summer is here and so our thoughts turn to other pursuits. If you’re lucky enough to have a window office, it can be hard to focus on work when on the other side of the glass is one of those perfect days that cause us to daydream about being on the golf course, by the water, or in the garden.
The stock market seems to have trouble with its focus as well. Looking at the returns by season that the stock market has provided over the past 57 years, summer is a yawner. If you began with $10,000 in 1958 and every year bought the S&P 500 on June 1 and then sold on August 31, you would have a grand total of $12,615. That’s an average annualized return of less than 2% per year, not even keeping up with inflation! Contrast that with the fall (Sep – Nov) and winter (Dec – Feb) seasons, where this same exercise would have the initial $10,000 growing to over $42,000. Not bad for only investing 3 months each year.
If we break the returns down by month, June has had one of the lowest average and median performances since 1958. Only July and September have worst median returns. On the flip side, June is also the least volatile month of the year.
Now, I’m not advocating that anyone manage their investment portfolio by the calendar. However, these exercises do provide some insight into the market and show that seasonality does come into play. So over the next few months when you’re at your desk imagining your toes in the sand, you’re not alone. Maybe the market is looking out the window as well.