The Dog Days of Summer in the United States are nearing the end. The Dog Days are generally referred to as the period in August when people are in vacation mode and seek the coast to escape the heat. Trading volume normally thins out on Wall Street. Americans often take their last trip on the 3-Day Labor Day weekend, before the dash towards year-end commences. It’s changed a bit over the years as schools now start well before Labor Day. It used to be that Labor Day was the unofficial last day of Summer. I, for one, believe that’s the way it still should be. I firmly understand my vote doesn’t count though. Am I alone in this belief about Labor Day?
Out of curiosity, I re-visited the origin of the term “Dog Days”. It was actually pretty interesting what I found. The Old Farmer’s Almanac is still a great resource. It suggests that the Dog Days actually end in mid-August. Both the Greeks and the Romans identified the Dog Days. The Romans called the hottest days of summer “diēs caniculārēs” translation: “Dog Days.” The term apparently came to life in Rome as the citizens associated the hottest days of summer with the star Sirius. It was known as the “Dog Star” because it was the brightest star in the constellation Canis Major (Large Dog). For the Egyptians, Sirius appeared just before the season of the Nile’s flooding, so they apparently used the star as a “watchdog” for the floods. Since the rising of the star also coincided with a time of extreme heat, the connection with hot weather was made. Homer referenced it in the Iliad. Even Dickens referenced it in A Christmas Carol. There is also this ancient proverb: “Dog Days bright and clear indicate a happy year. But when accompanied by rain, for better times our hopes are vain.”
Something that didn’t take time off this year was the Stock Market. Stocks have sizzled all Summer and really caught heat in August, a month that is normally a challenge for investors. It was the best August on the S&P in 4 years and the best August for the Tech-heavy NASDAQ since the year 2000. Apple soared nearly 20% on the month, clearing the $1 Trillion Market Cap level marking the first ever American company to do so. Amazon is hot on its tail, currently valued over $980 Billion. These are really big moves for these really big stocks.
Importantly, the rally has broadened out in August, with the S&P, the NAS and the Small-Cap Russell 2,000 all reaching fresh, all-time highs this week. There is nothing Bearish about all-time highs. They’ve also come at a time when investor sentiment has been somewhat skeptical. The herd has been missing out. According to recent fund flow data, money has been leaving stocks for months and moving into bonds. Political and geopolitical issues have weighed heavily on investor psyche, but have been unable to stall the rally. This sets up the seasonally worst month on the calendar for stocks. September has long been the worst performing month for the Market. September weakness often spills over into October, which has experienced a large number of bottoms before a year-end rally. There hasn’t been much weakness of late and the undercurrents remain quite positive for continued strength. Like a submerged beach ball underwater, the US Stock Market has demonstrated all Summer an inability to stay down. When fund flows reverse back into stocks in size, it will catch our attention and signal the end of the rally is nearing. We are ready for whatever comes our way and believe higher levels are still ahead.
My youngest daughter Brooke absolutely loves puppies and her birthday is in August. She will be thrilled to know that she was born in the Dog Days of Summer!
Have a nice weekend. Enjoy the Labor Day holiday. We’ll be back, dark and early on Tuesday.
Mike
