August Is No Day at the Beach With Second-Most U.S. Stock Swings

Monthly breakdown of S&P 500 1%+ swings

This week’s lack of direction in U.S. stock trading may be deceiving if history is any guide, according to Sam Stovall, a strategist at S&P Capital IQ.

As the attached chart shows, August has brought more daily swings of 1 percent or more in the Standard & Poor’s 500 Index than all but one other month since 1950, according to data that Stovall cited three days ago in a report. The exception is October, the month in which stocks crashed in 1987.

August’s first two days of trading brought S&P 500 losses of 0.3 percent and 0.2 percent, followed by a 0.3 percent gain yesterday. In the first seven months of the year, the index’s moves crossed the 1 percent threshold 33 times on a closing basis, according to data compiled by Bloomberg.

“The market itself may also be telling us that more volatility -- along with a disappointing overall price performance -- lies ahead,” Stovall wrote. The ratio of the S&P 500 high beta and low volatility indexes is sending this signal, the New York-based strategist wrote.

The high-beta index fell 10 percent through yesterday from this year’s high, set on April 23. The indicator tracks the 100 companies in the S&P 500 that fluctuated the most relative to the index during the past 12 months. The low-volatility index, comprised of 100 stocks that swung the least, rose 1.3 percent during the same period.

“Investors have been in a ‘risk-off’ mindset,” Stovall wrote. “In the month ahead, investors may therefore be more inclined to focus on their tans than on their portfolios.”

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