Mark Hulbert, MarketWatch, writes: “….How did investors and
advisers come to believe in a Summer Rally in the first place? I have no idea,
but it might have had something to do with the extraordinary rally that
occurred in the summer of 1932, in the depths of the Great Depression. The Dow
nearly doubled during that year’s summer’s rally. Without outlier years like that one, the
Summer Rally loses even more statistical support.
“Since 1940, for example, the average Dow gain from the end
of May to its highest close over the next three months is just 4.0%. Seven of
the other 11 months of the calendar sport higher average “rallies” than this.
“Of course, the stock market will rally at some point this
summer. But its odds of doing so are not any greater than at any other time of
the year. After all, every season of the year sees the stock market at times
going up — just as it also witnesses periods of market decline. The widespread
belief in a Summer Rally is a good illustration of the tricks our minds can
play on us…
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