US markets just wrapped up a winning July, with the S&P 500 and Nasdaq both notching their fifth positive month in a row.
But August is here, and that often means trouble for markets. The last time the S&P 500 was on a winning streak this long was in 2021, when it was positive for seven months in a row — until August hit and ended the victory run.
Welcome to the summer doldrums.
The well-known Wall Street adage says "sell in May and go away" because the summer, and August in particular, marks a historically volatile period for the stock market. That's largely because so many investors take vacations and there are decreased trading volumes. This reduced activity can lead to increased volatility.
On average, August has been the worst performing month for stocks since 1986, according to Morningstar.
And this August may be choppier than usual because it's particularly busy for late summer. It's chock full of economic data, a key conference and big corporate reports. That means the dwindling number of traders who remain must take extra care in a such a potentially volatile environment.
Here's what to watch for:
Earnings reports: Apple and Amazon both report this week, and all eyes will be on these tech titans for clues about the mood among US consumers.
"This week's Apple earnings report is critical for markets, as Apple is not only the market's most valuable company, it's also a litmus test for consumer spending, which so far has been keeping the economy afloat. But we have been seeing some signs of a consumer slowdown," said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management on Monday.
With a valuation of $3 trillion, Apple is the most valuable publicly traded company, and its report could easily swing the direction of the markets.
Unemployment numbers: The US jobs report for July is expected on Friday. This is the first major piece of data following the Federal Reserve's recent decision to increase interest rates by a quarter of a percentage point. With unemployment sitting near record lows and the Fed indicating the demand for workers needs to ease, this report will surely make an impact. Analysts expect the unemployment rate to remain the same, at 3.6%, according to Refinitiv estimates.
Inflation data: The consumer price index, a key measure of US inflation, is due out next Thursday. The price gauge is expected to cool but still remain well above the Fed's target 2% rate. Analysts, however, worry that there could be a sting in the tail given oil prices have been rebounding off recent lows.
This time around, "August's volatility could be extra elevated if we see hotter-than-expected inflation readings," said Landsberg, "given the rise in gasoline and commodity prices over the past few weeks."
Jackson Hole: The end of August marks the Federal Reserve Bank of Kansas City's symposium in Jackson Hole, Wyoming. There, Fed officials, central bankers from around the world and top economists will mingle and discuss policy. At the end of the meeting, Fed Chair Jerome Powell typically delivers a keynote address laying out his policy perspective for the rest of the year. Markets don't always like what they hear.
Last year, his speech sent the Dow down more than 1,000 points — its worst day since May.
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