When it comes to the stock market, certain months have reputations that stick. December is often remembered for “Santa Claus rallies.” October evokes memories of crashes (1929, 1987, 2008). But ask seasoned investors which month they quietly dread, and many will answer: August.
The late summer month has an outsized reputation for volatility, thin trading, and disappointing returns. But is August really cursed – or is its bad reputation a statistical quirk magnified by investor psychology?
Let’s dig into the evidence, look at both “bad Augusts” and “good Augusts,” and consider whether the pattern might hold – or break – in 2025.
The Historical Evidence
Statistical studies of market seasonality confirm that August consistently ranks among the weaker months for U.S. equities.
S&P 500 Data: Since 1986, August has averaged slightly negative or flat returns, making it one of the three weakest months along with September and June.
Dow Jones Industrial Average: Looking back to 1896, August shows lower-than-average returns compared to other months, with significantly higher volatility.
Volatility Index (VIX): Spikes in the VIX – Wall Street’s “fear gauge” – are more common in August than in many other months, often tied to sudden geopolitical events or economic scares.
The pattern doesn’t guarantee losses, but August has enough history of disruption to make investors wary.
Storytelling Through “Bad Augusts”
To understand the reputation, it helps to revisit specific Augusts where markets stumbled.
August 1998 – Russian Default & LTCM Crisis: Russia defaulted on its debt, rattling global markets and sparking contagion fears. By late August, the Dow had fallen more than 15% from July highs, while hedge fund Long-Term Capital Management teetered on collapse.
August 2011 – Debt Ceiling & U.S. Downgrade: After a bruising fight in Washington over the debt ceiling, Standard & Poor’s downgraded the U.S. credit rating. In the first week of August alone, the Dow shed nearly 2,000 points, one of the steepest drops in its history.
August 2015 – China’s Currency Shock: When China unexpectedly devalued the yuan, it triggered a global selloff. On August 24 (“Black Monday”), the Dow opened down more than 1,000 points in a flash crash before recovering some losses.
Each of these episodes occurred in an August where thinner summer trading amplified the market’s reaction.
The Forgotten “Good Augusts”
Yet, August’s reputation as a “danger month” overlooks the fact that not all Augusts are bad. Some have been surprisingly strong.
August 1982 – The Start of a Bull Market: On August 12, 1982, the Dow rallied 38 points (a huge one-day move for the time), marking the end of a grinding 16-year bear market and the beginning of one of the greatest bull runs in history.
August 2009 – Recovery After the Financial Crisis: With the U.S. economy stabilizing after the Great Recession, the S&P 500 surged nearly 3.6% in August, adding to the remarkable rebound that began in March 2009.
August 2020 – Post-Pandemic Rally: In the depths of COVID-19 uncertainty, the S&P 500 posted a nearly 7% gain in August, one of its best summer months ever, as investors embraced the tech-driven recovery.
These examples remind us that while August often carries risk, it can also serve as a springboard for long-term rallies.
August Weakness Might Hold in 2025
So, what about this year? Here are three reasons August 2025 might live up to its rough reputation:
Monetary Policy Uncertainty: The Federal Reserve remains in a delicate balancing act – fighting inflation while avoiding a hard landing. Any hawkish signal in August, when markets are thinly traded, could trigger outsized volatility.
Geopolitical Risk. August often coincides with geopolitical surprises. With conflicts and trade disputes simmering across multiple regions, an August flare-up could once again rattle global markets.
Earnings Fatigue. By August, most companies have finished reporting Q2 results. With corporate fundamentals out of the spotlight, investors often turn to macro fears – Fed policy, growth, and global stability – leaving markets more vulnerable to selloffs.
August Weakness Might Not Hold in 2025
On the other hand, August’s reputation could be upended by favorable conditions:
Resilient Economy. If consumer spending and employment remain strong, investors may focus on growth momentum rather than seasonal patterns.
Non-Election Year Calm. August 2025 falls between major U.S. election cycles. With less political brinksmanship than in 2011 or 2024, markets may experience fewer August shocks.
Global Liquidity and Central Bank Support. Should central banks maintain accommodative stances – particularly in Europe and Asia – global liquidity could cushion markets against August turbulence.
The Fool’s Game of Timing
It’s tempting to look at August’s history and think you’ve found a signal: get out in late July, return in September. But here’s the danger: even in months with poor averages, the biggest market gains often cluster in unpredictable ways. Missing just a few of those days can devastate long-term returns. Research by J.P. Morgan found that missing only the 10 best days in the S&P 500 over 20 years cuts returns by more than half, and those “best days” often sit right next to the worst ones.
At West Advisory Group, we’ve seen these patterns play out countless times. That’s why we don’t chase market timing. Instead, we focus on what we can control. Through our signature PEAK FORMula, we’ve built a process designed to help clients weather volatility, avoid costly mistakes, and stay disciplined through the ebbs and flows of retirement life.
Our team of experts is perfectly matched to guide those who are within five years of retirement—helping you shift from the accumulation phase of your working years into the distribution phase of retirement with clarity and confidence.
The lesson? Don’t try to outguess the market. Rely on a plan that’s built to last, no matter what month or what challenge comes your way.
