Summer Doldrums Into A New Season

As we truck along on into September, I anticipate us getting out of the Summer doldrums and into a new season. Obviously right! While I’m at it, I’ll remind you that the sun will rise in the morning…

The real questions are, where are we going and what should we expect? At least from a historical perspective…

 

I’m the kind of person that looks forward to the different seasons. I actually quite enjoy the changes whether it’s going into the summer, fall, winter, or spring. What bothers and annoys me is that whatever store I walk into, they seem to always be prepping me for my next season. So in spring they are prepping me for summer and in the summer prepping me for fall and so on.

 

I walked into a store just the other day and saw Christmas decorations all over the place and I was really blown away. In my mind, I was just wanting to enjoy the summer time, beaches, and pool parties and here I was being pitched Christmas in the middle of August. I can’t say I blame the store for this; considering Christmas sells way better than any other holiday or time of year. In fact, if I was running a store like that, I would probably have Christmas songs playing and reindeer up all year if it would increase sales.

 

But the good thing about the stock market and money is that people aren’t so much worried about the here and now, but more so what the future holds…

 

When summer comes around, it brings bring what traditionally has been the weakest period of the year for the stock market. Less money coming in and traders heading out on vacations typically keeps volume low, and most sectors have, at least for the last 20 years, declined during the third quarter, which covers most of the summer season. Along with lower volume, historically we tend to see less volatility. This means there’s less people taking risks and riding the waves that go along with volatile markets.

Since 1990, the S&P 500 Index fell an average of 0.9% in the third quarter, compared with a gain of 1.9% for all four quarters, according to Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research. Fall is typically the rebound occurs that resulted from any retracement that has occurred during the summer.

Basically, the summer is just not a booming time for the stock market. When it comes to even businesses that run their businesses based on the stock market this is still the slower season. The weather is just too nice to be sitting in front of a computer trying to figure out the future of stocks.

But as people return home and time transitions into the fall seasons, usually stocks begin to climb again. More money and more attention gets directed towards the financial world and stocks historically go up towards the end of the year.

So if those brief historical facts are any indication of what we are to expect in the future, we should see stocks continue to climb throughout the remainder of the year.

In one of my previous articles, I’ve discussed some of the reasons in addition to the cyclical patterns throughout the year why I still believe strongly in the US stock markets based on where we are and how this situation has played out in the past. I might not be bullish on many of the people at the helm of our economy, but I do not think the run is over in stocks for thinking in a 1-3 year timeline. If you are in it for the long haul thinking in terms of 20-40 years, it’s definitely not over and time is on our side. 

To read our August 20th article on interest rates and Stocks, click here!