If you thought last month was volatile, you were on to something. News that the Federal Reserve could soon reduce its support for the economy sent the Dow Jones Industrial Average (^DJI 0.67%) barreling up or spiraling down by triple-digit margins in 16 of the month's 20 trading sessions. But at the end of the day, the reaction to the Fed's announcement turned out to be far more bark than bite.
Let me be clear: June was anything but docile for investors. The average daily movement of the Dow was 136 points. This was the highest average since the year 2000, and it handily beat out the runners-up (2012 and 2008), which came in at an average of 115. In addition, as I alluded to, a full 80% of the trading days closed either higher or lower by a triple-digit margin.
|
Year |
Average Daily Move (Points) |
No. of Trading Days |
No. of Triple-Digit Moves |
% of Triple-Digit Moves |
|---|---|---|---|---|
|
2013 |
136 |
20 |
16 |
80% |
|
2012 |
115 |
21 |
9 |
43% |
|
2008 |
115 |
21 |
11 |
52% |
|
2002 |
102 |
20 |
12 |
60% |
|
2010 |
101 |
22 |
10 |
45% |
|
2000 |
97 |
20 |
10 |
50% |
|
2011 |
95 |
22 |
9 |
41% |
|
2006 |
80 |
22 |
6 |
27% |
|
2007 |
79 |
21 |
7 |
33% |
|
2001 |
75 |
21 |
7 |
33% |
|
2009 |
67 |
22 |
5 |
23% |
|
2003 |
66 |
21 |
5 |
24% |
|
2004 |
48 |
21 |
1 |
5% |
|
2005 |
42 |
22 |
4 |
18% |
Source: Yahoo! Finance
If one were to stop here, it'd be tempting to conclude that last month was the most volatile June on record, or at least since the turn of the century. But, as you may have guessed, there's more to the story.
Take a look at the following table. By these measurements, June was actually a comparatively pedestrian month. Average daily volume was the second lowest in the past 14 years. And it was in the middle of the pack in terms of both the average daily percentage movement and the aggregate change (in absolute points and percentage) between the beginning and the end of the month.
|
Year |
Average Daily Volume |
Average Daily Movement |
Total Point Movement |
Total Movement (%) |
|---|---|---|---|---|
|
2006 |
3,149,845 |
0.73% |
(18) |
(0.16) |
|
2002 |
2,891,860 |
1.06% |
(682) |
(6.87) |
|
2008 |
2,528,548 |
0.94% |
(1,288) |
(10.19) |
|
2009 |
2,510,945 |
0.78% |
(53) |
(0.63) |
|
2007 |
2,489,343 |
0.59% |
(219) |
(1.61) |
|
2003 |
2,375,167 |
0.73% |
135 |
1.53 |
|
2001 |
2,326,814 |
0.69% |
(410) |
(3.75) |
|
2005 |
2,283,355 |
0.40% |
(193) |
(1.84) |
|
2010 |
2,246,218 |
1.00% |
(363) |
(3.58) |
|
2004 |
1,957,671 |
0.46% |
247 |
2.42 |
|
2011 |
1,762,027 |
0.79% |
(155) |
(1.24) |
|
2000 |
1,726,040 |
0.91% |
(74) |
(0.71) |
|
2013 |
1,494,224 |
0.91% |
(206) |
(1.36) |
|
2012 |
1,422,186 |
0.92% |
487 |
3.93 |
Source: Yahoo! Finance.
Now, this isn't to say that there weren't individual exceptions last month. UnitedHealth Group (UNH -1.98%), for instance, was up by approximately 5% over the course of June. This has been a particularly hot sector of late given the ongoing developments in health care. As my colleague Dan Caplinger pointed out, last April, the government had to delay a central component of Obamacare. And this past week, it did the same with a second component -- to read more about this, check out Dan's take on it here. Both moves give insurance carriers like UnitedHealth more time to figure out how to comply with the legislative overhaul.
On the downside, alternatively, shares of Alcoa (AA) plummeted by more than 10% over the same time period. The problem in this regard is the same one that gold stocks like SPDR Gold Shares (GLD -2.47%) are facing -- for an interesting take on why so many investors fell for the gold bubble, click here. That is, commodity prices are falling as investors and traders come to the realization that a long-assumed wave of inflation simply isn't materializing. Thus, because Alcoa's fortunes are largely a function of aluminum prices, which have been falling, well, you can do the math.
These performances aside, the overall lesson here is that it sometimes pays to look at the facts behind the media's hysteria. Was June a trying month for investors? Sure. But, at the end of the day, it really wasn't all that different from any other June.
