Stocks rose yesterday as investors finally decided to wade back into the water following a recent rout in tech shares. Technology led the rally sparked by encouraging news from chipmakers.
Doggy bag, please. There is a certain region in Europe from which my family predominantly hails, whose inhabitants are obsessed with calendars. Now, I keep a tidy calendar, but I am far from obsessed with it, though I am a bit uptight when it comes to punctuality ⌚ and rules following . Perhaps it skipped a generation, because my daughter is a PROLIFIC calendar junky, and Her’s are literally works of art. That being said, I am cognizant of seasonality when it comes to the markets.
We are now firmly in those dog days of summer. How can I tell? The streets of Manhattan contain more tourists than residents. Most locals have tried to escape the heat by visiting families and friends in “the country” or near the shore. Pro tip: to New Yorkers, “the country” is anywhere but the city or the Hamptons (NY beaches) . OK, so now that we have, through some obscure heuristic, established that it is the summer in the northern hemisphere, we could have just consulted a calendar that shows us smack in the middle of the month of August. If we want to be less official about it, we could just look at how the market is behaving. Wait, what? The market?
Yes, the market. The S&P500 has better months than others, historically speaking. If we look back at the average returns of the S&P500 by month since 1928, we will find that July clocks in with the top return of +1.7%, on average. If we rank the months in order, 1 being the best and 12 being the worst, August comes in at number 6 with an average return of +0.7%. Given that last month is ranked number one, this month may feel rather… well, lackluster. The S&P is down by -2.16% month-to-date through yesterday’s close, which is far from last month’s +3.11% gain and June’s +6.47% jump. So, is history simply repeating itself?
Well, first of all we still have 13 more trading days in the month, and lots can happen in that time. We also have to be careful with averages. Knowing an average without knowing a standard deviation can fool us. The timid +0.7% average return for August could have been the result of wildly skewed numbers in both directions which could leave us with significant gains OR losses. Ok, ok, perhaps some other time I will get more into the math, but for now, I will simplify the analysis by letting you know that in the past 95 years, the S&P500 had a positive return in August 55 times and loss 40 times. That sounds a bit better, doesn’t it?
As I said earlier, I am far from calendar-obsessed, but I do know that September is the next month. Unfortunately, I also know that, historically, September is the worst month of the year, with an average return of -1.1% since 1928. September ended up in the red 52 times since 1928… that is a majority . Last September, the S&P lost -9.34% and in September 2021, the index gave up -4.76%. Wait, why am I going on and on about September? It is still August, and though I am not in the country or the shore, I think that perhaps, I shall enjoy my beautiful NYC for the next 2 weeks. I will sit on a nice patinaed bench in some random park and remember that September always comes after August, and though I have lived through many tough Septembers in my 30+ years of doing this, I have also learned that there are many bumps along the road to investing success, and that long-term focus always wins. If you do find yourself in New York, please come and visit us.
WHAT’S GOING ON BEFORE THE OPENING BELL
DR Horton (DHI) shares are higher by +2.72% in the premarket after a 13-F filing from Berkshire Hathaway revealed that it took a new position in the homebuilder. In the past 30 days, 76% of analysts have modified their price targets 13 up, 0 down, and 4 unchanged. Dividend yield: 0.81%. Potential average analyst target upside: +18.0%.
NVIDIA Corp (NVDA) shares are higher by +1.48% in the premarket after UBS and Morgan Stanley both raised their price targets for the company ahead of next week’s earnings announcement. Berkshire Hathaway’s 13-F also revealed that that it increased its position in NVIDIA. Dividend yield: 0.03%. Potential average analyst target upside: +16.0%.
Discover Financial Services (DFS) shares are lower by -6.62% in the premarket after the company announced that its CEO would be stepping down and leaving the board of directors. Details of the move have not yet emerged. Dividend yield: 2.72%. Potential average analyst target upside: +16.2%.
YESTERDAY’S MARKETS
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