Should Investors Brace for Late-Summer Volatility?
Many market strategists are predicting a shaky next few months of market action. Here's how to mentally steel yourself.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
The stock market is well on its way to an above-average performance for 2021. The S&P 500 has gained 18% for the year to date, while the Dow Jones Industrial Average and Nasdaq Composite have improved by just a little more than 15%.
That climb hasn't come in a perfectly straight line, however, and stocks could be in for a couple shaky months – at least if seasonality has to say anything about it.
Here are a few quick tips for how investors should prepare themselves for what some are predicting could be a volatile August-October period:
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
#1: It's time to get your head in the game after a sleepy summer.
The stock market is entering what is usually one of its toughest three-month stretches of the year.
August tends to be a weak month when July is quiet. September has been the S&P 500's worst month on average. And October has been the S&P 500's most volatile month on average. Plus, investors seem extra nervous about growth and a pandemic resurgence these days, which could lead to risk aversion.
Put it all together, and the market looks primed for a pullback.
#2: At the same time, seasonality isn't a guarantee, and this market has proven to be resilient.
The S&P 500 hasn't dropped 5% or more in almost 10 months – an unusually long time without a sizable selloff. And the S&P 500 is poised for just its third summer in history when it hasn't fallen 3% or more below a record high from June to August.
#3: Calm stretches like this can last for a while.
Especially with above-average growth and a supportive Fed.
#4: Don't fall victim to gambler's fallacy by thinking the market is due for a big drop just because it hasn't done so in a while.
Staying out of the market could be more risky than staying in, as we've seen for the past year and a half.
#5: If stocks drop, try cognitive reframing.
Wise investors view pullbacks as stocks on sale instead of times to panic. Why? Because markets go up and down. That's just the natural rhythm of investing. That's why the S&P 500 has clocked 8% average annual returns since 1950, even after enduring 32 drops of 10% or more over that period.
Your brain's risk compensation may tell you to run, but the risk could end up working in your favor.
Callie Cox is Ally Invest's senior investment strategist. Her opinions do not necessarily reflect those of Kiplinger's.
-
5 Vince Lombardi Quotes Retirees Should Live ByThe iconic football coach's philosophy can help retirees win at the game of life.
-
The $200,000 Olympic 'Pension' is a Retirement Game-Changer for Team USAThe donation by financier Ross Stevens is meant to be a "retirement program" for Team USA Olympic and Paralympic athletes.
-
10 Cheapest Places to Live in ColoradoProperty Tax Looking for a cozy cabin near the slopes? These Colorado counties combine reasonable house prices with the state's lowest property tax bills.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
