With summer finally upon us, many of you are probably packing your bags for the beach, the lake, the camping ground or some more exotic locale. You vow to put away your smartphone, shut off your laptop and “go dark” on things like work emails, phone calls and social media. People who work on Wall Street pull a similar summer disappearing act. As a result, the stock market tends to slow to a halt, and trading volume erodes.
According to data from Investment Technology Group (ITG), July and August have been the least active months on Wall Street by average daily U.S. trading volume in two of the last three years. Last summer, July and August were the two slowest months on Wall Street in more than a decade. Pre-election uncertainty undoubtedly has something to do with that. But trading volume is always slow when hedge funders go on vacation.
No real surprise there.
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What’s perhaps even more stark is the lack of gains in stock prices during the dog days of summer. The S&P 500 has averaged a 1% loss in July and August over the last four years. That during a time when the index has averaged a return of nearly 16% a year. Most of those losses came in August 2015, when stocks tumbled 6.2%. The other three summers in the study period have been mostly mundane, with little share price movement.
Brexit dominated trading last June, when Britain’s surprise vote to exit the European Union sent stocks crashing for two days. Within a week, however, stocks had not only recovered but were in a full-on rally that lasted until mid-July. However, from that point until people returned from vacation in September, they barely budged.
It all points to the same thing: summer is a tough time to buy stocks. That doesn’t mean there won’t still be a few gems out there this July and August—there always are. But the broader summer stock market trend is indifference.
Perhaps that fits well with your schedule. Like most of Wall Street, chances are you’ll spend much of the next two months getting away from your online trading accounts. As recent data suggests, merely holding stocks is a sound summer investing strategy.
But if you’d like to keep tabs on the market while you are away, you’re already in the right place! Daily columns from stock market historians and market-trend experts like our Mike Cintolo, Tim Lutts and Paul Goodwin will help keep you in the loop—keeping you informed on when it’s time to buy stocks, when it’s time to prune your portfolio a bit, and which investment opportunities they think could buck the summer malaise.
To read all our latest updates—from wherever you are this summer—visit the Cabot Wealth website by clicking here.
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