Summer often brings lighter trading volumes, which can lead to larger market swings even on relatively minor news, says Kim Inglis of Raymond James. She explains why seasonal volatility is normal, and why July has historically been one of the strongest months for the S&P 500 despite the potential for short-term pullbacks.
Why Summer Volatility Doesn't Tell the Whole Story
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Kim Inglis:
Hi, I'm Kim Inglis, Senior Portfolio Manager with Raymond James. The summer in the markets can sometimes behave a bit differently and so oftentimes investors wonder why. So the charts that I've got for you today help explain why that is. And one of the first reasons is that trading volumes in the summer, in June, July, August, tend to be quite a bit lower than the rest of the rest of the time in the, in the, in the calendar year. and so when trading volumes are lower, it means that there's less buyers and sellers in the market, which ultimately means that small bits of news can really influence things, and you can see larger swings, price swings. So as a result, you end up seeing a fair bit more volatility. So historically the average drawdown for the S&P 500 in those months is about seven percent. But despite that performance, if you actually look over the last twenty years, has actually been pretty good in the summer. July has actually been one of the best months of the whole year. and so it's important for investors to realize that seasonal volatility is very much normal, but it doesn't mean that that's how your portfolio's gonna end up performing. You know, it can actually do a lot better if you stay invested and not let seasonal volatility shake you out of your long-term plan.