Over the last 20 years, August has been a mediocre month in terms of stock market performance. Over that time frame, the S&P 500 has experienced upward movement in 13 of those 20 years, accounting for a 65% success rate. On average, the S&P 500 only rallied 0.3% in August. Compare that to July which has averaged 2.3% rallies over the last 20 years.
This is applicable if trading the SPDR S&P 500 Trust SPY (NYSE:SPY) or a similar ETF.
Note that the chart says 2003 to 2022 to reflect the last 20 completed months of August. Chart courtesy of StockCharts.com.
Over the past 10 years, the S&P 500 has performed about the same. It has moved higher in six of the last 10 years (60% of the time) and has averaged a gain of 0.3% once again.
Turning our attention to other indices for further confirmation, the NYSE Composite has witnessed upward movement in August in 11 of the last 20 years. That is 55% of the time, and the index has averaged a loss in August of -0.4%. Over the past decade, the NYSE Composite has experienced upward movement in four out of 10 years, with an average August return of -0.7%.
The NYSE Composite is a very broad index, including companies from all industries and of all sizes. It is representative of a "typical stock" and shows that a wide range of stocks don't perform well in August.
The Nasdaq 100 index, which is highly focused on large technology companies, has shown upward movement in 12 of the last 20 years (60%). On average, the index gained 1.1% in August. Over the past ten years, the average return has been 1.5% and the index has moved up in six out of those 10 years (60%). This would be applicable if trading the Invesco QQQ Trust Series. Technology seems to fair decently in August, at least in terms of returns.
Coming into August, the Financial, Energy, and Communication Services sectors have been the strongest over the last month. Technology is the top performer over the last three months. The S&P 500 and Nasdaq 100 are currently in uptrends. While August tends to be a bit slower month for many stocks, it is still worth looking for trades setups on the long side. The ETFs themselves are also tradable. SPY and QQQ (NASDAQ:QQQ) are some of the most actively traded ETFs, and there is also the option to gain additional exposure through leveraged ETFs such as the Proshares Ultra Pro QQQ (NASDAQ:TQQQ) or the ProShares UltraPro Short QQQ (NASDAQ:SQQQ). These ETFs move three times as much on a daily basis as QQQ.