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Sunday, July 6, 2008

Does June Gloom = Equity Boom?

Apologies in advance for that awful title...

Yesterday's Barron's: The Bears Back post, along with friends "non-expert" advice all Holiday weekend that the market could only get worse, pushed me to do some analysis as to where we may be headed.

Dow's June was the 8th worst month on record since 1940! Below is a breakdown of the 16 worst months over that time frame (16 allowed October AND November of 1987 to act as bookends, which I like for some reason), along with the corresponding 6 month / 1 year returns following those declines.

Are things as bad as they seem? Maybe not. On average, the Dow was up 9.6% and 12.2% (over 6 and 12 months) respectively during those following periods.

Do I think the U.S. economy has seen the worst of it? I don't, but I think it may be time to get some skin back in the equity game...