This summer hasn't been very relaxing for investors, who have had to deal with the threat of tapering, rising interest rates, a number of new record highs on the major indexes, and, more recently, a possible military offensive in Syria. And with many market participants believing the Federal Reserve's stimulus tapering will begin in September, all while interest rates have been increasing and the Syrian conflict has escalated, August was the worst month for the major indexes thus far this year.
During the month, the Dow Jones Industrial Average (DJINDICES: ^DJI ) lost 689 points, or 4.44%. The blue-chip average entered the month trading at 15,499 and hit an all-time high of 15,658 on Aug. 2. Now the index rests at 14,810. That performance follows a 3.5% gain in July -- proof that as quickly as gains can come on the market, they can disappear just as quickly.
The S&P 500 (SNPINDEX: ^GSPC ) and the Nasdaq have taken a slightly different path from the Dow, but they've moved similar to each other the past two months. The S&P 500 started July at 1,606, ended the month at 1,685, hit a high of 1,709 Aug. 2, and closed August at 1,632. The Nasdaq, meanwhile, entered July at 3,403, closed the month at 3,626, peaked on Aug. 5 at 3,692, and closed the month at 3,589. The Nasdaq performed the best on a percentage basis, as it rose 6.55% in July and dropped only 1.02% in August, which still gives it a net gain of 5.46% over the past two months. The S&P 500, meanwhile, rose 4.91% in July and dropped 3.14% in August, leaving it with a two-month net gain of 1.61%.
And the Dow? It lost ground over the past two months, starting July at 14,909 and ending August at 14,810, a 99-point, or 0.66%, loss. August was only the second month this year it ended a month down, the last being in June, when it lost 1.36%. Back then, interest rates quickly rose in the last few weeks of May and through the majority of June as we first heard talk of tapering from the Federal Reserve members. I've written in the past about how big moves on the Dow this year have all related to days and months in which the Federal Reserve is meeting, having a press conference, or releasing meeting minutes.
I believe that for the remainder of 2013, we're bound to see more volatility in the market as the year ends and investors grow more concerned about tapering, or it actually begins and the markets react to the tearing off of the bandage. With that said, the sooner the Fed begins the tapering, the sooner the uncertainty and fear pertaining to it will begin to dissipate, which I believe will allow the markets to begin moving higher again.
But since we don't know when the tapering will start, or when the market will begin rising, average investors can only sit patiently and wait. And since you're just killing time until the next pop, if the market does continue to move lower, cheap buying opportunities may begin presenting themselves to those who are both patient and alert.
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