Ever wonder why Aug and Sep are weak months?

SP:SPX   S&P 500 Index
Ever wonder why the market is historically weaker in August and September? On August 15 interest on treasuries is paid from the Fed "other reserves" account which appears to briefly tighten central bank liquidity (normally adverse to risk assets during the QE/QT era). On September 15 the final quarterly tax payment for the fiscal year is due, which seems to be preceded by a brief drawdown.

The combination of the 2 events this time of the year result in seasonal weakness. Looking at the years 2015 through 2022 we can observe that the market was:
  • trending up leading into August 75% of the time,
  • flat or down from 8/15 to 9/15 63% of the time, and
  • finished the year higher than the 9/15 close 87% of the time.

Additionally, since 1938 there are 14 years in which the market advances >10% through July that are followed by a negative August. They all finish the year higher, with an average rest of year performance of 9.9% (median 8.7%).

This history suggests that the earlier part of September is a stronger time to take profit, or trim/exit any positions, while after the 15th should be favorable to accumulate or start new positions.

This is a link to ANG Traders, a seeking alpha author that did a study on years 2016 to 2022. His analysis is incredible.

This is a link to Ed Clissolds twitter post with the prior years with S&P advancing >10% through July.

This is a link to the seasonality chart created by EW_T. These seasonality charts have a bar that represents % of the month in positive territory and a number at the bottom that is the average gain/loss.

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