It's summertime and the livin' is easy. The investing, less so.
Everyone knows that September can be a scary month for stocks, yet August can be no picnic either: Looking back to 1950, average returns during August have been just 0.01%, making it one of the worst months of the year for the market. In fact, the late summer period, when trader and newsflow can be scarce, can frequently be a weak period for the market
August and September are the only two calendar months that tend to decline on average, writes SentimenTrader Senior Research Analyst Jay Kaeppel.
Looking at the annual seasonal trend of the S&P 500 shows that the index often experiences a lull between the 137th trading day of the year and the 197th, he notes. This year, that corresponds to the period between July 21 and Oct. 14. In fact if you invested $1 in the S&P 500 index only from trading day #137 through trading #197 every year since 1985, you would wind up with about 55 cents.
This doesn't happen every year -- in fact, the period in question hasn't delivered negative returns since 2023, when the S&P 500 was down 4.6%, as the last two years the index was positive. Ultimately, it's basically a coin toss, with seasonal summer weakness from days 137 to 197 showing up roughly half the time. That said, when the pattern does hold and the S&P declines, both the average and median losses (7% and 5.2%, respectively) tend to be bigger than the average and median gains when the index stays positive (5% and 4.1%), Kaeppel writes.
The issue is that because it's basically a 50-50 shot, it becomes a bit of a glass half full or empty situation for investors, he notes. Bulls will dismiss it, arguing it isn't relevant this year for whatever reasons, while bears will point to it as further evidence that a market decline is on the horizon.
As usual, the wisest course of action is likely to be a middle ground.
"Regardless of whether or not it actually plays out, now may be a good time to start planning for an impending 'period of seasonal weakness' for the S&P 500 Index...a) be alert to the potential for market weakness in the weeks and months ahead, and b) to decide now on a plan of action -- if any -- if that weakness actually materializes," Kaeppel advises. "In other words, an 'investor' might consider raising some cash as a hedge, or plan to do so if price falls x%, or drops below a moving average, etc. A 'trader' might explore ways to play the short side of the market, i.e., index futures, inverse exchange traded funds, options, etc."
Just don't blindly sell in May and go away.
Write to Teresa Rivas at teresa.rivas@barrons.com
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July 16, 2026 15:01 ET (19:01 GMT)
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