Probabilities suggest August tends to be tough = be wary. But we expect drawdowns to be shallow.

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Today's note will include a short video update. We discuss: Why August probabilities suggest investors be somewhat wary.  There are some key economic data in the next two weeks, and the USD and oil need watching.  But the key is how one is positioned for a drawdown. (Duration: 5:37).

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Anecdotally speaking, it seems clients refer to August as a "month to lose money." Last year, the S&P 500 fell 4.2% (but August 2022 took place when stocks were caught in a death vortex from January to September).

August is a month when many Europe and US-based investors take holiday, so there is a tendency for market depth to weaken. And if there is idiosyncratic news, the impact could be amplified. As for "bad" Augusts, history bears this out, since 1950:- August avg returns +0.01% (one of worst months)- win-ratio is only 55%- avg drawdown is -3.2%, implying 150 points downside to S&P 4,430 When S&P 500 is up >15% thru July 31:- August avg return -1.4%- win-ratio only 40%- avg drawdown -3.5% So, it seems that the stronger the year, the worse the August risk. What does this mean? It means one needs to respect the negative seasonal going into Aug...
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