U.S. stocks had their worst day since September 2022 this week, but the move shouldn’t come as a surprise to some investors. That’s because the S&P 500 often experiences its most volatile day of the year in August, according to a study by CNBC Pro. Fears of a U.S. recession were a major reason for this week’s meltdown in global markets. Investors are also worried that the Fed will fall behind in cutting interest rates to cushion the economic slowdown, with the central bank choosing last week to keep interest rates at their highest level in two decades. Coincidentally, an analysis of FactSet data shows that every summer since 1932 has been the second most volatile month after October. One explanation for this is that trading volumes were lower this month, as many market participants were sunning themselves on vacation rather than facing trading terminals. On average, S&P 500 contracts traded about 3 billion units per day in August, about 20% lower than January, when average trading volume was highest, according to volume data going back to 1999. Total returns, as well as the volatility represented, are generally in the middle of the pack. On average, stock prices rose 0.5% in August, well above December’s average decline of 1.2% but well below January’s massive 1.67% gain. August as a whole has been the most unstable month in just 5 years since 1928, and April has been the most unstable month in 15 different years. Methodology: One-month volatility is calculated as the standard deviation of monthly price returns over a year.
