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Minyan Mailbag: The Ruins of June Jason Goepfert Jun 30, 2008 4:22 pm |
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Prof. Goepfert,
What has happened historically after months this lousy, particularly during secular bears?
Thank you,
Prof. Sedacca
Prof. Sedacca,
One of the pieces of data that's been drifting around the past couple of days notes that this is shaping up to be the worst June in the DJIA since the Great Depression.
That's sobering stuff, so let's take a look at the S&P 500 and see how this month is shaping up (subject to change, of course, as the month is obviously not over just yet). 
This would be the worst June swoon in the history of the index, beating June 1962 by about 1%. There was a particularly nasty 25% spill in the four months leading up to June '62, a touch worse than what we've seen so far this time around.
Overall, this month would rank 10th on the all-time dunce list, and the worst month since September 2002. Going forward there wasn't a lot consistent about the other months. There was a generally positive bias, but that's the case for any random month, and especially so after a down month.
Five of these "worst months" occurred during the last bear market from 2000 - 2002, and surprisingly enough the next month was positive four of the five times, and we were positive three months later three of the five.
During the mostly-pathetic 1970's, six of the months qualified for this list, and again the performance going forward was mixed to even slightly positive when looking out longer than one month. There were some huge sell-offs following these already-disastrous months, but also some major rebounds.
I'm not sure that this has a ton of use other than the headline shock factor ("10th Worst Month of All Time!"), but generally there has been a positive bias following horrendous performances like this.
-Jason
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Jason Goepfert is president and CEO of Sundial Capital Research, Inc., which publishes sentimentrader.com. Prior to founding the firm, Mr. Goepfert managed the operations of a large discount brokerage, then the operations of a $1 billion hedge fund. For more of Jason's commentary, visit sentimentrader.com. He also welcomes your comments and feedback at Jason@minyanville.com.
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