In August, the S&P 500 was down 5.7% with an annualized volatility of 47%. With this negative return in August, the S&P 500 ranks in the bottom 10% of monthly returns since 1928. Over that time, 58% of monthly returns have been positive with an average return of 0.6% (7.4% annualized). August volatility was in the 98th percentile over that period at more than triple its 15% average since 1928. Just 25 out of 1,004 months over the past 83 years have experienced higher realized volatility than in this past August 2011.
Now consider this, especially weighed against the evidence in the above: If September finishes in negative terrain, as seems to be the case, it will be five down months in a row. Since 1928, there have been only nine episodes when the S&P 500 declined for such a stretch or more (1974, 1990, 2008-09 more recently). Now if the losses extend through October, then we will really be living through history — there have been just four instances of such a long losing streak over the past eight decades.
Remember this front cover story that ran on in the USA Today at the start of the year: It’s All About Stocks. Even our old buddy and former colleague is in that pic rubbing shoulders with the likes of Abby Joseph Cohen. It conjures up an image of Bob Farrell’s Rule #9 about how we should be treating herd mentalities (especially after the market doubles in a two-year span). Anyhoooo ... it certainly has been all about stocks so far in 2011, but at least since April, not the way this group of market pundits were expecting.
With this negative return in August, the S&P 500 ranks in the bottom 10% of monthly returns since 1928. Over that time, 58% of monthly returns have been positive with an average return of 0.6%