We Are Approaching the Worst Month for the Stock Market. Would It Be a Good Idea to Sell in August?

Both bullish and bearish investors often argue that August belongs to their side of the market narrative. Bulls may view it as a strong month for stocks, while bears claim it historically underperforms. However, neither camp is correct. When examining the full historical dataset, August emerges as a completely average month for U.S. equities. Statistically, its performance is neither significantly better nor worse than that of other months.

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On average, stocks post a dividend-adjusted gain of around 0.70% across all months, and August aligns closely with this long-term figure. In essence, if one were to predict how the market will behave in August, the most reasonable expectation would be that it performs in line with the overall market’s historical average.

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Despite this neutrality, many analysts continue to interpret August data in ways that reinforce their own market biases. These interpretations often depend on which time period or index they choose to analyze. For example, some analysts rely on data dating back only to 1957, the inception of the S&P 500 index.

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Looking through this narrower lens, August does appear weaker than most months. Since 1957, the S&P 500 has averaged a modest 0.10% gain in August, ranking it 10th out of 12 months, significantly lower than the overall monthly average of 0.70%.

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Conversely, analysts who prefer using the Dow Jones Industrial Average, which has data going back to 1896, paint a much more optimistic picture. Using this longer dataset, August ranks fifth in terms of monthly average performance. The Dow shows that August has historically delivered an average return of about 1.0%, nearly double the average monthly gain of 0.60% for the other months. This interpretation makes August seem like a strong period for equities, but it depends heavily on the index and timeframe chosen.

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Even when sticking to one benchmark, such as the Dow, August’s relative performance has lacked consistency. A look at average monthly returns illustrates this inconsistency. Over the full historical period from 1896 to the present, August appears as an above-average month.

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Yet, when focusing on more recent decades, specifically data from 1990 onward, August becomes one of the market’s weaker performers, ranking as the second-worst month for returns. This sharp contrast highlights the problem of drawing firm conclusions based solely on selective timeframes.

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To arrive at the most statistically sound conclusion, analysts must consider the broadest dataset available. That dataset, compiled by Edward McQuarrie, professor emeritus at Santa Clara University’s Leavey School of Business, tracks stock market performance back to 1793.

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Using this extensive historical record, August has produced positive returns 58.4% of the time. This is only slightly above the 54.4% average for all other months—a difference too small to be statistically meaningful. In other words, there’s no evidence to suggest August consistently behaves differently than the rest of the year.

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The takeaway for investors is clear: any confident claims about August being particularly good or bad for stocks are based more on selective analysis than on solid evidence. Analysts who declare August as a notably weak or strong month are often “torturing the data” to fit a predetermined narrative. Whether they choose 1957 onward, the Dow instead of the S&P, or cherry-pick more recent decades, their conclusions reflect analytical bias rather than a true market pattern.

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Ultimately, the market’s performance in August is no more predictable than in any other month. Historical data covering more than two centuries shows that August typically aligns with the long-term market trend, offering no compelling reason to expect outsized gains or losses.

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Investors should therefore approach seasonal claims with skepticism and avoid making trading decisions based on the assumption that August is inherently bullish or bearish. The safest bet is to expect August to behave much like any other month, providing modest, average returns consistent with the broader history of U.S. equities.

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