August: Dog days of Dow

Despite ranking near the worst performing months of the year for all three major stock indexes, August has produced more up months than down months. August is the 10th worst month for the Dow Jones Industrial Average and the 11th worst for the S&P 500 and Nasdaq Composite, though since 1950 it has produced 37 up months versus 30 down months in the Dow and S&P 500.

August is perhaps best known for a lack of interest as many traders and investors tend to vacation in August and prefer to be out of the market. However, it has seen some volatility. The worst August across all indexes was 1998 when the Russian Debt Crisis exploded, which would lead to the implosion of hedge fund Long-Term Capital Management.

In recent years a new trend has developed as August has produced negative returns in each of the last three odd-numbered years. The most recent being 2015 when the Dow dropped more than 1,000 points in a couple of days following weakness in the Chinese stock market. Depending on how you measure it, it was the first correction of 10% or better in equities since 2011, which also struck in August. Will history repeat in August 2017?