August is actually not quite as weak as the statistics appear. While ranked 10th in overall performance for all of the indexes, the average monthly change is not indicative of the balance between the “up” vs. “down” months. In fact, it has been higher more months than lower (see “Vital August Statistics”).
The responsibility for the very low overall rank likely relates to the times when August was more than nominally weak. This often occurred during crises of varying degrees. While we have not micro-analyzed all of the statistics, there were several major events that brought the average down.
Those include the sharp selloffs during the 1997 Asian Contagion, 1998’s Russian financial crisis that included a ruble meltdown and part of the 2001 major dot-com bubble pop. More recent were the 2011 U.S. government debt ceiling confrontation at the same time as the Eurozone crisis and the 2015 Chinese currency dislocation. All of these contributed to depressing the market performance. August tends to end up higher than July more than half the time.
In fact, August performance during election years breaks away from the pack. While other months in the classically weak May-October period tend to underperform in election years, August does better than average. The DJIA has been up 0.8%, S&P 500 up 1.0%, and the more limited history of the NASDAQ shows a gain of 2.9% during election years. So much for dog days.