The myth of the summer rally

Marketplace Staff May 26, 2008
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The myth of the summer rally

Marketplace Staff May 26, 2008
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TEXT OF INTERVIEW

Scott Jagow: The stock market could really use the traditional summer rally this year. Or wait, is that an old wives’ tale. I forget.

Good thing we have Allan Sloan from Fortune Magazine. Well, Mr. Sloan, is there anything to the summer rally?

Allan Sloan: Well, if you look at the numbers, you would discover that in the months of July and August, the market goes up far more than it goes down. And in June, it’s roughly 50/50, you know, whether it goes up or down, the Dow. I don’t think the market cares what season it is, because in fact for 10 months of the year, the Dow historically has gone up more often than it’s gone down. There are only two months when it hasn’t, so I mean, you can have a seasonal rally pretty much at any season, but people have picked on summer.

Jagow: But is there any reasonable basis for these numbers?

Sloan: Oh, no. And then there’s a counter myth, you know, just to confuse us more. Have you ever heard the line “Sell in May and go away?”

Jagow: Yes, of course.

Sloan: I mean, and that doesn’t really make any sense either, but it sounds good.

Jagow: But there is some statistical basis for what happens in September, isn’t there?

Sloan: Right, September, the odds are that stocks will go down. Now, that doesn’t happen every September, because if it happened every September then everybody would know about this and it would stop happening. But historically, September has been the worst month of the year for the Dow. I mean, those are the only numbers I have, because the Dow is what you analyze when you’re being playful — the S&P is what you analyze when you’re being serious. And the analyses you see are largely playful. So, I mean, maybe it should be . . . is there anything wrong with August? I mean, maybe sell in August, and . . .

Jagow: Yeah, maybe that should be the new one. Well, I think if you’re basing your stock market investing on astrological signs, you might be in a bit of trouble.

Sloan: Yeah, that’s generally not the way to do it. Though I’m a Sagittarius, and I’m sure that’s good.

Jagow: Haha! All right, Allan Sloan from Fortune Magazine. Thanks.

Sloan: My pleasure, Scott.

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