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Now, August is good for stocks

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This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Tuesday, August 31, 2021

The worst month of the year... has been a great month. 

When August began, investors were warned that history has not been kind to the stock market during the summer's final full month. 

This is an annual tradition in markets commentary. 

Over the last 10- and 20-year periods, the S&P 500 Index's (^GSPC) average return during August has been negative — a distinction only matched by September's similarly poor performance. And in years that follow a presidential election, only February has been less kind to investors. 

And with concerns that include the Federal Reserve tapering its asset purchase program, the spread of the Delta variant and worries over expired unemployment insurance benefits, August 2021 seemed full of potential pitfalls for markets. 

Almost none of which have been borne out. 

With the S&P 500 closing at a record on Monday, the benchmark index has now made 13 record highs this month. Any advance on Tuesday will mark yet another record for the index. Through Monday's close, the S&P 500 is up more than 3% so far this month, and on track for its best monthly gain since April. 

Instead of the summer doldrums, this month saw Wall Street strategists start cranking up their longer-term forecasts for the stock market. Earnings results, meanwhile, have continued to impress. And with so many eyes on the Fed's next move, it seems the much-feared redux of 2013's taper tantrum has started to fade as a market risk. 

But if this August disappointed relative to one version of market history, it shined when seen through another light. 

Through July, the S&P 500 had turned in a positive monthly performance for six straight months. And as LPL's chief market strategist Ryan Detrick noted on August 2, the S&P 500 finished higher in the seventh month two-thirds of the time we'd previously seen this setup. And over the next year, stocks were up an average of 12% in 18 of 21 periods that followed six straight monthly advances for the S&P 500. 

Moreover, we're in year two of the bull market that began in April 2020. Since 1957, the second year of bull markets have seen the S&P 500 return, on average, some 13.3%, according to data from Keith Lerner at Truist. Through Monday's close, the S&P 500 is up 20% so far in 2021. 

And with the benchmark index now working on seven straight winning months in year two of a bull market— amid an economic expansion — skeptics will have to do better than "too far, too fast" to outline what will stop this market's momentum. 

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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