U.S. equity markets kicked off the month of June on a positive note yesterday, with the Dow and S&P 500 both adding 0.2%. This morning, however, stocks opened lower as continuing worries over a Greek resolution weighed heavily on investors.
Historically, the coming months have always proved difficult for the markets. In today’s newsletter, we’ll highlight some key steps to take to tackle the dreaded “summer slump”.
The "Worst Six Months" of the Year
From May to October, U.S. equities have historically logged some of their worst performances. Since 1950, these “Worst Six Months” have resulted in the S&P 500 averaging a mere 1.3% gain, compared to its average 7.1% gain during the “Best Six Months”.
June, July and August are usually some of the toughest months, since they see significantly lower trading volumes as many traders and market makers in both the U.S. and abroad take extended vacations. For some historical perspective, below are the monthly returns for the S&P 500 in June:
| Year | S&P 500 Returns |
|---|---|
| June 2014 | 1.91% |
| June 2013 | -1.50% |
| June 2012 | 3.96% |
| June 2011 | -1.83% |
| June 2010 | -5.39% |
| June 2009 | 0.02% |
| June 2008 | -8.60% |
| June 2007 | -3.20% |
| June 2006 | -1.90% |
| June 2005 | 0.91% |
Over the last 10 years, the S&P 500 has lost 1.56% on average during the month of June. 60% of the time, the index ended in the red for the month.
Make a Game Plan
Many investors tend to take the backseat during the summer months, but with equities sitting at or nearing record-breaking valuations, June and the next few months may prove fruitful for prudent investors.
More than likely, the Street will experience some pullbacks as certain stocks fall victim to selling pressures during the summer season. For us dividend investors, however, falling prices may present a key opportunity to buy in or scale into existing positions. To stay organized, we suggest investors make a “watchlist” for themselves and set strict criteria (such as P/E and relative strength targets) for when it makes sense to take action.
As always, make sure fundamentals are center stage during your investment decision making process, check your gut-reactions at the door and stay calm during the so-called “Worst Six Months”.
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