The Investment U E-Letter
Monday, July 28, 2003
* * * * * Wall Street's Deadest Month
By Dr. Steve Sjuggerud
President, Investment U August is Wall Street's "deadest" month. The extent of just howbad this time of year is on Wall Street will likely shock you… After reading this e-mail, you may just decide to avoid buying stocks altogether during the months of August and September… Time for Golf There's not much happening on The Street right now, and chances are there won't be: this is the time of year the big boys on The Street take their official vacations. And this is also the time of year the folks working under them take their "unofficial vacations" - taking care of personal matters during the workday and disappearing from the office for hours at a time without explaining where they're going. The cover of this week's Barron's magazine tells the story… The cover isn't about the latest hot investment - it's about golf. For an investment magazine like Barron's, it seems inappropriate. But for a magazine catering to guys working on Wall Street, it is COMPLETELY appropriate… This is Wall Street's downtime. August in particular is Wall Street's deadest month, historically having the lowest trading volume. Nobody is around. And the folks that are around aren't working. When it comes to stock market returns, the picture gets even worse… "Sell In May And Go Away" August and September are actually Wall Street's worst months…In a study from 1971 to 2001, you'd have lost money by just investing in the market in August and September. While 2002 was not part of that study, it was no different - the market was down over 10% in August/September 2002. In another, older study, this one from 1950 to 2000 by Ned Davis (www.ndr.com., my favorite research outfit), if you'd bought the market on the first trading day in October and sold the third trading day in May, $10,000 invested would have turned into $595,909. If instead you'd bought on the fourth trading day in May (inclusive of the two deadest months) and held until the last trading day in September, $10,000 would have only turned into $12,977. Said another way, from May through September, you would have madenearly $3,000 over 51 years. From October through April, you'd have made nearly $600,000 over that same time span. Historically speaking, there are better things to do with your money than speculate on the upside in stocks this time of year. It appears there is some truth to the old Wall Street saying "Sell in May and Go Away." If you're thinking about buying a pile of stocks now, remember that you're facing some serious headwinds at the moment - we're entering what is traditionally the worst period of the year for stocks, corporate insiders are selling at their highest rate since 1986 (IU #258), and remember, stocks are still expensive. Based on these factors, it may be prudent to hold off on stock buys until the end of the summer…
Good investing,
Steve | 
