8/13/13 9:22 AM – Expectation for Stocks for Rest of 2013

Recently I posted some historical data on how poor the months of August and September tend to be. Today, I read an article by Ned Davis Research, an organization whose research I really like, that sheds more light on this.

NDR looked at all years that like 2013, had at least a 15% gain through July. It then looked how they fared one month and five months later. As expected from the data I posted, one month later (August) markets were higher only 42% of the time since WWII.

However, by the end of those years with great Jan-July starts, markets were higher 12 of 14 times, with one year being flat and the other down -22%, which was 1987. So, 93% of the time, markets were flat or higher. The median gain for that five-month period was 3.3%.

So, it seems that in market years with a big front half, August and perhaps September seem to be months in which the market either takes a breather or drops but October-December tends to do well. Even being invested through August and September has paid off 93% of the time. That is of course no guarantee of what will happen this year but it is interesting.

My strategy so far has been to not make any changes in existing accounts during August but to only partially invest new stock market money in August and play it by ear for investing the balance. I still think that makes sense.