U.S. stock markets had their worst day since September 2022 this week, but for some investors, such developments may come as no surprise. That’s because the S&P 500 often experiences its most volatile day of the year in August, a study by CNBC Pro found. Fears of a recession in the U.S. were the main reason for the global market meltdown this week. Investors are also concerned that the Federal Reserve is behind on cutting interest rates to cushion an economic slowdown, opting instead to keep rates at their highest level in two decades last week. Coincidentally, the summer month is the second most volatile day since 1932, after October, according to analysis of FactSet data. One explanation for this is the low trading volumes during this month, as many market participants prefer to lie in the sun on vacation rather than sit at their trading terminals. An average of around 3 billion S&P 500 contracts are traded per day in August. That’s about 20% less than January, the month with the highest average trading volume (as shown by trading volume data since 1999). While stock prices often fluctuate dramatically in August, the total return for the month – and the volatility that comes with it – is often in the middle range. On average, stocks gain 0.5% in August. That’s considerably more than the average loss of 1.2% in December, but much less than January’s big gains of 1.67%. August as a whole was the most volatile month since 1928 in just five years. By comparison, April was the most volatile month in 15 different years. Methodology: The standard deviation of a year’s monthly price returns was used to calculate a month’s volatility.
