September 1, 2020

Bill Hastie |

The Dow and S&P 500 ended what is an otherwise stellar month yesterday on a down note, while the NASDAQ just kept climbing.  On the day, the Dow and S&P 500 dropped 223.82 and 7.70 points, or -0.78% and 0-0.22%, respectively.  The NASDAQ bucked that trend by gaining 79.82 points, or +0.68%.

The Dow and S&P 500 just finished their best August in more than 30 years.  The Dow surged 7.6% in August for its fifth positive month in a row and its best August gain since 1984.  The S&P 500 gained 7% and was also its fifth straight month of gains, and its best August since 1986.  The tech-heavy NASDAQ surged 9.6% in August for its best monthly performance since the tech bubble in 2000.

Interesting to note that the best August on record came in 1932 when the Dow and S&P 500 exploded for gains of 35.8% and 39.1%, respectively.

The market’s 5-month (almost) “V” shaped recovery from its March 23 low has some investors concerned about what is to come next.  From a historical standpoint, it is a “good news/bad news” situation.  Let’s start with the bad news.  Following a string August, September tends to be a down month, historically averaging in the -0.4% to -0.5% range.  But to be fair, September has been the worst month for the U.S. stock market going back to the mid- 1800’s.  Now the good news – historically, after a strong August and weaker September, the balance of the year tends to finish strong.

We can talk about what things “tend” to do, or “historically” what they have done, but there is no historical precedent for the market/economic environment in 2020.  Economic recovery from the COVID-induced lockdowns is key to getting back to some sense of an “normal” economy – so far it seems to be a “three steps forward, two steps back” proposition.  Finally, enter the 2020 presidential elections which is 62 days from today.  This equates to a considerable amount of uncertainly for the investor to take in.