The Stock Market Black Hole (formerly known as "Summer")

Just in case you somehow missed the 12,356 obligatory “Sell in May” related articles (alas, including this one), let me just say either:

You don’t read financial articles very often do you?

Congratulations on recovering from your coma and Welcome Back!

Either way, the gist of conventional wisdom is that the stock market is a bad place to be after May and until sometime much later in the year. Typically, conventional wisdom in the stock market is best avoided. But in this case, there may be some truth to the rumor.

Consider the chart that appears in Figure 1. This line represent the growth of $1,000 invested in the Dow Jones Industrials Average only during the months of June, July and August, every year starting in 1965. Figure 1 – Growth of $1,000 invested in Dow Jones Industrials Average only during June, July and August; 12/31/194-5/29/2015

Now it is not as if the market hasn’t had some ups and downs along the way – it has. But the net result is – far lack of a better phrase – “a whole lotta nothin’.”

For the record:

*$1,000 invested only during June, July and August since 1965 was worth $982 as of 5/31/2015. Talk about “dead money.”

*This period showed a gain 28 times

*This period showed a loss 22 times

*The average gain was +5.05%

*The average loss was (-5.92%)

Summary

So what are the implications for summer of 2015? Truth be told, I am not so sure there are any. Other than the notion that if a trader or investor wants to make money over the next several months he or she may have to do something besides “just sit there.” A little “creativity” may be in order.

Jay Kaeppel