The August Stock Market Performance

The Stock Market August Performance Is Best in 34 Years

The US stock market’s August performance is one for the books. All in all, the major indices posted their best August for some time now. Both the Dow Jones and the S&P 500 closed out the month with gains of more than 7%, their best in 34 years. The DJIA rose 7.6%, while the S&P went up 7.2%. Nasdaq also emerged as a winner, gaining 9.6% during the month.  All three major indices recorded their fifth straight month of gains

The final day of August saw dips from DJIA and S&P 500, but not enough to pull them to the red. The Dow slipped 0.8% or 223.82 points to 28,430.05, while the S&P 500 went down 0.2% to 3,500.31. Nasdaq rose 80 points on August 31, posting a 0.7 % gain. The day's losses didn't faze the month's gains.

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August's last day also debuted stock splits from tech giants Apple and Tesla. Apple split its stock 3 for 1, while Tesla exchanged 5 shares for each stock.  Both hoped the splits would make their stock more affordable to investors. The market welcomed them with a barrage of buying. Apple gained 3.4% on the day, while Tesla hovered in the $500 range before settling to $498, closing with a 12.57% increase.

Tech Stocks Push S&P 500

Nowhere are the gains more dramatic than in the S&P 500. August saw the index posting a record high on seven occasions. It helped that the S&P 5000 held some valuable stocks: Netflix, Facebook, Alphabet, Amazon, and Apple.  These account for 26% of the S&P’s total value. Removing these five from the index plunges the S&P to a year-long loss.

Dow Jones Reconfigured

The Dow Jones Industrial Index (DJIA), which hosts 30 public stocks, made some changes. This was a reaction to the Apple stock split, which will lessen tech representation in the DJIA. As a result, the Dow added three tech stocks and removed three old-timers. Amgen, salesforce, and Honeywell replaced ExxonMobil, Pfizer, and Raytheon. 

With this new lineup, the Dow is now more accurate in reflecting the influence of the tech sector in the market. During the first day with the newcomers, the Dow inched within a few points to its record high of 29,551.42. The 30,000 mythical ceilings got closer.

Nasdaq hits a 5-month high

The tech-heavy Nasdaq Composite also celebrated a positive August. It closed at 11,695.63, increasing 0.7%, and saw its 40th closing high this year so far. The index was the prime beneficiary of the stock splits from Apple and Tesla. Workday Inc also carried Nasdaq on the last day with a 12.6% gain.

All in all, Nasdaq gained 9.6% in August, posting its best monthly performance in the last 20 years.

Fascinating Run

What's fascinating is that all these gains are occurring despite the current economy. Coronavirus has kept businesses from operating in full. Unemployment is high for almost half a year, and the economy has contracted. While there are signs of recovery, a full reopening is months away until a vaccine gets approval.

Even with the gloom scenario, the economy started to pick up. Stocks responded to the Fed's updated fiscal policy and news on an improving job market. By August, the indices have offset all previous losses for the year.

September Incoming

While it was all cheers for the markets last month, this month gets the reputation as a buzzkill. LPL Financials warn that September is “the worst month of the year on average.” According to Chief Marketing Strategist Ryan Detrick, this trend goes back to 1950. What's more, in the last two years the market rose above 5% in August were in 1986 and 2000. The S&P then proceeded to fall by 8.5% and 5.4% the next month.

Stocks often go down in September, the elections might cause even more fluctuations. While the Republicans seem to gain lost ground the last few weeks, it's still too early to call. Also poised for a thrilling finish are the Senate and Congressional races.

Add to that awaited developments on the fight against coronavirus, and the stage is set for a wild ride. Strap yourselves in!

Watch this as CNBC Market reports on stocks still head for best August since 1984:

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Do you think the market's wild ride will continue in September? Or will September be the start of a screeching end? Let us know which camp you belong to by sharing your comments below.