We are in the midst of August, the "dog days of summer", and all we hear about now is a 'seasonally weak' period for markets. History is on the side of these commenters, yet maybe things are a bit different today. Let's flesh it out and see if we can take advantage.
August seems to get the blame for many bad things to come. There are no 'pure' or 'fun' holidays in August, and in the northern hemisphere it is usually the hottest time of the year (weather-wise). As it relates to markets, the action is often thin, volatility starts to rise (as it did last week) amid uncertainty and we often see this as a setup to two of the worst months of the year - September and October. Such a bad rap!
Statistics show August as being one of the highest volatility months on record. Further, the performance in markets has it near the back of the pack, and in 2015 we saw a major spike in volatility coupled with a massive market drop. That eventually led to a great buying opportunity, as most big drops eventually become.
August is notorious for wild swings as the summer winds down, earnings reports start to slow and traders head to the beaches one more time before the Labor Day holiday commences. We often have Fed uncertainty too, as the Fed's Jackson Hole meeting is often an event where new policy initiatives or directives are leaked. This usually causes some panic for both bulls and bears, and the anticipation leading up to the meeting increases market volatility, and with it poor performance.
Yet, I have seen some of the best trading opportunities in August. In a stock picker's market, it really doesn't matter what month we are in, we can find opportunities if our eyes and ears are open. This August follows seven straight up months for the SPX (S&P 500 Index) - nearly unprecedented. We may be due for a pause after the index has risen some 10.5% through July, and that once again makes everyone scream 'boo' at the month of August, getting a bad rap. Trade the market in front of you, regardless of the month or day.