“Yes, it’s summer, my time of year,” as the group War sang in that golden oldie “Summer” from the 70s, reminiscent of pleasant times at the beach or at the barbecue. There’s no need to remind anyone then of droughts, wildfires or Covid-19 waves that are unfortunate features of this year’s steamy season.
But the arrival of August also means we’re entering what has historically been the most treacherous time of the year for stocks, according to data dating back to 1928 and compiled by Bank of America analyst Stephen Suttmeier. He thinks that the
index had negative returns averaging 0.03% in August, September and October — the worst three-month period of the year for the big-cap benchmark. In fact, they are the only three-month period that is in the red on average.
August actually ranks between the best and worst months of the year, he adds in a research note. July has an average return of 1.58% on the S&P 500, with positive results 59.1% of the time, while September averages a negative 1.03%, ending in the plus column less than half the time, or 45%.
In July, it even outperformed the norm, with the S&P 500 gaining 2.27%. It was also the index’s sixth straight month — the longest positive run since September 2018, according to Dow Jones statisticians. In that period, the cumulative advance amounted to 18.34%.
The August record is somewhere in between, with an average return of 0.70% S&P 500 and positive results 58.1% of the time, marking a transition from the “summer crack” to the “autumn slump.”
Not surprisingly, the lagging returns of the August-October period are accompanied by an increase in volatility, Suttmeier says. Based on data going back to 1992,
Cboe Volatility Index,
or VIX, has seen frequent spikes in those months, after relatively moderate volatility in the April-July period.
Past is not a prologue per se, but if it is, the timing of the IPO by
(ticker: HOOD) could be beneficial if the stock market has its typical seasonal rough patch. The online broker, whose purported mission is to open up investment to novices who are supposedly ignored by established outfits, sold 55 million shares on Thursday for $38. In the process, it provided a valuable lesson for anyone who got in on the IPO: buy low and sell high.
The company apparently met the latter requirement and sold its shares high even though they were priced at the lower end of the projected range of $38-$42. Their price fell 8.4% on their first day of trading, though they bounced back Friday. what recovered. By the end of the week, Robinhood’s IPO-owned buyers were down 7.5%.
Among those selling high were the company’s co-founders, CEO Vladimir Tenev and Chief Creative Officer Baiju Bhatt, who each sold 1.25 million shares in the IPO. As my illustrious predecessor, Alan Abelson, liked to point out, there are many good reasons to sell a stock, but expecting it to rise is not one of them. That has never been the case, given the ability of wealthy owners to monetize their assets by borrowing cheaply against them, and without paying capital gains taxes.
To be sure, Tenev and Bhatt still have significant stakes in Robinhood. As our colleague Avi Salzman reported, these were worth $2.5 billion at the initial offering price, and Tenev and Bhatt retain voting control. The two could also receive shares worth as much as $6.7 billion for Tenev and $4 billion for Bhatt, if the stock hits $300, or nearly the proverbial ten-bagger from here.
But in a blow to income inequality, the potential billionaire couple took token pay cuts to $34,248, the average annual wage of American workers. As the comedian Yakov Smirnoff likes to say, “What a country!”
How those workers are doing will be a subject of the monthly employment report to be released next Friday.
Economists’ forecasts for nonfarm payrolls revolve around a profit of 900,000. Jefferies economists Aneta Markowska and Thomas Simons estimate that the increase could exceed the long-awaited one million mark; they predict 1.2 million.
Markowska and Simons believe that the expiration of additional unemployment benefits in some states will increase labor supply, although there is much debate about that. (See this week’s main article for more on the job market.)
Read more Up and down Wall Street: Why there are many jobs and still unemployment
Write to Randall W. Forsyth at firstname.lastname@example.org