Published August 06, 2013
Market data suggest that investors should watch out for a summer swoon. But a top market strategist says not so, it’s Haight-Ashbury hippie time for the markets, which he says are now in a 1967 redux.
The last three summers, the Dow dipped on average 9.6%. Since 1993, the Dow Jones Industrial Average has suffered a tiny average loss of less than 1% in August, ending the month up higher six out of ten times, says Bespoke Investment Group. Four out of ten chance there, with September posting a worse track record, Bespoke says. It is the only month in which the Dow has suffered a loss on average over the past 20, 50 and 100 years.
But maybe the June swoon could have been the summer’s only fainting spell, dropping 750 points, or nearly 5%.
“It has been a summer of love for the stock market,” says Jeffrey Kleintop, chief market strategist at LPL Financial. “As the temperatures heated up, so did the stock market. From June 24 to August 2, 2013, the S&P 500 Index rose 9%, pushing stocks up about 20% for the year. The last time we saw stocks perform the way they have this year in both pattern and magnitude was 1967.”
Here are Kleintop’s eight similarities between now and 1967:
Kleintop offers a caveat, though: “Of course, there are lots of differences between now and 46 years ago, and there is no assurance that stocks will continue to follow the 1967 pattern.”
But he adds: “Nevertheless, if the pattern in the stock market mirroring 1967 that has unfolded so far this year holds in the second half, we may see a volatile market with a slower pace of gains—but more record highs ahead. That historical flashback happens to be consistent with our market forecast for the second half of the year.”