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'Cause
It's Summer
Brian
Trumbore
President/Editor, StocksandNews.com
Until the experts looked behind the
numbers, for years market lore had you believe that
the fabled "summer rally" was the best time of year
for Wall Street.
Alas,
the facts prove otherwise, and the summer rally, defined
as the May / June low to the 3rd quarter high, has
the smallest gain of any seasonal rally, +9.4% (as
represented by the Dow Jones Industrial Average) since
1964. [With the trend in equities 'up' over the long
haul, all four seasons are positive.]
The
best period is the "winter rally"; the November /
December low to the first quarter high, +13.7% over
the same period.
[Source:
2003 Stock Trader's Almanac]
But
some of you may find the following helpful, my own
way of playing with the numbers. I look at the period
between the close for the S&P 500 the Friday before
Memorial Day and the Friday before Labor Day. Toss
in the total return on the S&P for the year, along
with both the price / earnings ratio and the investor
sentiment readings for the week before Memorial Day
and voila!
Of
course the period 1997-2002 includes the good and
the bad, yet with the exception of the summer of 2000,
the season has badly underperformed the year as a
whole. You're also reminded how we've become used
to such high valuations and bullish sentiment, the
latter at least among the investment advisors.
1997:
S&P 500 +33.4% (total return for the year)
5/23?847.03
(S&P 500)?8/29?899.47?+6.2%
p/e 21.2?bull / bear: 44.9 / 30.5
1998:
S&P 500 +28.6%
5/22?1110.47?9/4?973.89?-12.3%
p/e 28.1?bull / bear: 47.5 / 25.0
1999:
S&P 500 +21.0%
5/28?1301.84?9/3?1357.24?+4.3%
p/e 33.9?bull / bear: 60.7 / 28.6
2000:
S&P 500 -9.1%
5/26?1378.02?9/1?1520.77?+10.4%
p/e 27.0?bull / bear: 46.0 / 32.4
2001:
S&P 500 -11.9%
5/25?1277.89?8/31?1133.58?-11.3%
p/e 25.6?bull / bear: 47.9 / 35.4
2002:
S&P 500 -22.1%
5/24?1083.82?8/30?916.07?-15.5%
p/e 43.9?bull / bear: 53.1 / 30.6
2003
5/23?933.22?8/29
?
p/e 33.8?bull / bear: 56.0 / 20.9
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Note:
Both
Nasdaq and the S&P 500 have fallen each of the last
five Julys. [The Dow declined 3 of 5.]
*Wall
Street History will return June 13.
Brian
Trumbore
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