The statistical figures for the summer stock market slide are far more significant than those for the sell in may rule.
What is there for seasonal patterns and statistics! January effect, Sell in May effect, Halloween effect, year-end rally and much more – and the summer slump.
There are lots of statistics. Some of them with only a barely higher hit rate in the probability of more than 50 percent, like the famous “Sell in May …….but remember, to come back in September” rule. Now we are (at least already meteorologically) in the summer time and there is a very convincing sounding statistic for a stock collapse – at least temporarily.
The temporary stock market slump in summer – “almost” a certainty
Studies of price developments in the period between 1st of June and 30th of September have provided the following results for the US markets in the period under review since 1960 and for the DAX since 1988:
- S&P 500 and Dow Jones had to cope with an average price setback of 7 percent in this period.
- In the EuroStoxx this even amounted to 12 per cent.
- In the case of the Dax it was as high as 13.7 percent and this with a frequency of 87 percent. This means a slump in 27 out of 31 years. This is a statistical accumulation that can be found in hardly any economic figure.
Mind you. It is the average slump within these three months that is meant and not the result at the end of the period. The statistical figures for the summer course slide are far more significant than those for the “Sell in May Rule” et cetera.
After the first few months have been so extremely profitable for the bulls – but only for those who joined at the beginning of the year – the described price summer slump in 2019 could well occur. The uncertainties that are burdening the markets in the summer months, when sales are low, are too strong.
But as has been reported many times before there is a new imponderability in this dimension, the unpredictability of Donald Trump and his tweets.
A plastic deal with China, a postponement of customs tariffs and so on, and the markets would cheer. But in my opinion this would require a previous collapse of Wall Street and then the statistics would be right again.