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'Cause
It's Summer
Brian
Trumbore
President/Editor, StocksandNews.com
It's time for our annual look at summer
and the market. 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. According to the 2005 Stock Trader's Almanac,
here is the breakdown.
Winter
rally: Nov/Dec Low to Q1 High?.avg. 13.5%
Spring rally: Feb/Mar Low to Q2 High?..avg. 11.1%
Summer rally: May/Jun Low to Q3 High...avg. 9.4%
Fall rally: Aug/Sep Low to Q4 High??..avg. 10.9%
Of
course it should be noted that summer falls in the
midst of the worst six months for investing, historically,
that being the May 1 - October 31 period.
Well,
I have my own way of looking at the numbers utilizing
my extensive market archives. For example, following
is 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! [Actually, I'll let you market junkies
try and make sense of it all.]
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:
S&P 500 +28.7
5/23?933.22?8/29?1008.01?+8.0%
p/e 33.8?bull / bear: 56.0 / 20.9
2004:
S&P 500 +10.9%
5/28?1120.68?9/3?1113.63?-0.6%
p/e 23.0?bull / bear: 42.4 / 27.3
2005:
S&P 500 ?
5/27?1198.78?9/2??
p/e 19.9?bull / bear: 46.7 / 26.1
Note:
If nothing else, my look at summer just confirms the
underperformance for the period vs. the year as a
whole; with the exception being 2000. Regarding the
S&P 500 closing figure of 1520 on 9/1/00, this also
happened to be an important peak as many forget that
some of the broader averages had actually recouped
most of their losses from the cracking of the Bubble
in the spring of that year. It represented your last
chance to get out before the real bloodbath ensued.
---
Brian
Trumbore
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