Dow Jones Monthly Returns

Apparently, the Dow has just logged its best June return in more than 80 years. You may ask exactly the WTF is so important about June which is exactly what I did when I glanced at the article. If your conclusion is that there is nothing special about June at all then you would be in the same boat as me. To try and define if there was something special about the figure of 7.2% which is the June rise I pulled apart the returns for the Dow for the last 119 years. First I simply graphed the monthly percentage changes and generated the chart below.

A few things are obvious – there is more blue than red which is to be expected of an equity index with its usual upward bias. There are some sharp falls along the way which in the 1930s were offset by very sharp rises. This pattern doesn’t seem to repeat in the latter half of the chart. There are sharp falls but the rises don’t seem to immediately spring the index back to where it was. What is also obvious is that there is nothing special about a gain of 7.2% which in part seemed to be the implication of the article. To highlight this I dragged out all the months that had a return of greater than 7.2% and generated the table below.

Over the past 119 years, there have been a lot of months with a return over 7.2% – there aren’t many Junes but I don’t think this indicates anything other than a statistical artefact. What is more interesting from a historical perspective is the breakdown by decades. The early part of the last century saw a clustering of high monthly returns which peaked in the 1930s. In recent times things have quietened down a little bit. The explanation of why this occurs probably lies in the realm of increasing regulation. If you have read anything about the early history of Wall Street you would know that it was a wild place. Increasing regulation would dampen this down.

But back to the question as to whether there is anything special about June, probably not. I am not a fan of the notion of special months because it is a slippery slope from there into financial astrology. Best to always refer to what the actual data says.