As a New England resident who dreads the long, cold winters, it’s always hard to admit that summer is over. But with Labor Day in the rearview mirror, my wife back at her high school counseling job after her usual (and much-needed) two-month summer respite, and a few leaves already starting to lose their green hue in my neck of the woods, it’s true. Historically, summer’s end is good news for investors, as stock market performance tends to wane when most of Wall Street is on vacation. Indeed, things were characteristically slow in the markets again this summer.
With trading volume down as usual in July and August, stocks didn’t budge a whole lot most days. Volatility reached multi-decade lows, according to the VIX. And the S&P 500 extended its streak without a 3% pullback to 10 months—the longest stretch of correction-free trading since World War II.
All those days of small, almost microscopic upward movement in stocks resulted in a better summer for trading than usual. If you measure from Memorial Day to Labor Day (the unofficial beginning and end of summer), U.S. stock market results were pretty decent in the aggregate.
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Here is a historical examination of this summer’s stock market performance in the three major U.S. indexes:
S&P 500: +2.7% (best since 2014)
Dow Jones Industrial Average: +4.3% (best since 2012)
Nasdaq: +3.6% (best since 2014)
Not too shabby.
That said, not all stocks thrived. Small cap stocks were down slightly. Energy stocks were down more than 3%, as measured by the XLE ETF. Housing stocks were flat. Retail stocks continued to mostly struggle amid slipping sales and brick and mortar stores—particularly department stores.
But with sector rotation in full swing, buyers were out in full force for certain groups of stocks. Here are 10 sectors and stocks that had great summers:
Biotech Stocks: +16.3%
Gold Stocks: +8.0%
Alibaba (BABA): +38%
The Boeing Company (BA): +29%
Nvidia (NVDA): +20.2%
PayPal (PYPL): +20%
Facebook (FB): +13.2%
Caterpillar (CAT): +11.8%
Citigroup (C): +10.4%
Tesla (TSLA): +9.2%
As you can see, that’s a pretty varied list—ranging from gold miners and biotechs to blue chip tech stocks, bank stocks, chip stocks and airline stocks. And despite the relative churn in the housing sector overall, the performance in Caterpillar was evidence that not all housing stocks were stuck in the mud.
Like most summers, it was a stock picker’s market. While certain sectors performed better than others, there were also huge disparities within specific industries. Witness the difference between Amazon (AMZN) and Alibaba (BABA), which is essentially China’s Amazon. AMZN had a rare rough patch, while BABA was one of the best-performing stocks in the market. It goes to show that not all sectors move in lockstep, particularly when volume is so light.
What should we expect next now that investors have returned from vacation? September is historically the worst month for stock market performance, as hedge funds prune some of their weaker positions as a way of hitting the re-set button.
But after a summer of incremental improvements in the broad market and little volatility, there could be less selling than usual this September. After 10 months of almost no major selling, I wouldn’t bet against this market.
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