Chart of the Week: Market Responses to Outstanding Months

Chart of the Week: Market Responses to Outstanding Months

August 15, 2022

Vanguard’s 500 Index fund (a proxy for the S&P 500 index, since you can’t invest directly in an index) gained 9.2% in July—the fund’s 13th best month since its 1976 inception.

Given that the S&P 500 fell more than 20% in the first half of the year, the market was probably “due” for a bounce. Now that we’ve gotten a nice rebound, investors may be wondering what’s next. Those who held cash on the sidelines may be worrying, “Have I missed out?” Others may wonder, “Is an outsized month of gains an opportunity to sell?” The short answer to both questions is no.

Here’s why I’m unequivocal on the topic: I identified the strongest months in the market since 500 Index’s inception and looked at how the fund fared over the year following each. On average, the index posted a 15% return following the best months compared to a 13% average return in all 12-month periods from 1976 on.

The takeaway is simple: A strong month in the market isn’t a good reason to avoid the market going forward.

Note: Chart shows the 15 best single-month total returns for Vanguard 500 Index since its 1976 inception, ranked in descending order from left to right. It also shows the 12-month return following each of those months for which data is available. Sources: Adviser Investments, Vanguard.

This material is distributed for informational purposes only. The ideas and opinions contained herein  should not be viewed as recommendations or personal investment advice. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here.

© 2022 Adviser Investments, LLC. All Rights Reserved.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.