As we mentioned last month, despite May’s reputation as being a time to sell, other months — June, August and September, in particular — historically produce much worse equity market performance. June is a particularly poor performer, averaging negative performance in both the Dow Jones Industrial Average and the S&P 500.
June’s weak performance has often been attributed to the broader reduction of market activity in summer months. Many people take time off and often reduce their portfolio.
The weak performance is real as June has produced negative numbers in five of the last nine years, during arguably the strongest bull market of all-time following the March 2009 low.
The few rare corrective moves in the current massive bull market — occurring in 2010, 2011 and 2015 — encompassed the month of June. So given the current market volatility, it’s a safe bet to fade equities in June. The month produced negative results in the Dow every year from 2005 through 2011.
Ironically, despite a better overall average performance of 0.63% in June, the Nasdaq Composite has produced six negative monthly performances in June during the last nine years, which is more than the Dow and S&P 500. The bulk of the Nasdaq outperformance seems to be based on a massive upward correction from its dramatic bear market in 2000, so there does not appear to be a pairs trading opportunity in June.