August is not an easy month for long-term investors.
It has chalked up the worst monthly performance for the S&P 500 stock index over the past decade. And what makes it more painful is July has put up the best monthly performance numbers over the same time period. From first to worst in two months according to data from LPL Financial and FactSet.
The benchmark stock index has fallen about 3 percent already this month. That’s painful enough, but doing it in a matter of days, not weeks, shakes investor confidence.
Investors have been able to stomach past price swings brought on by trade wars with China and Mexico fought over Twitter, and growing worries about a slowing economy. The bad news was generally ignored, while any positive word uttered on trade was greeted with stock buying. Calls for the Federal Reserve to cut its target short-term interest rate, which it did in late July, also helped boost stock buying.
It is important to remember May’s 6.5 percent drop in the S&P 500 is the worst month for investors this year. It took about seven weeks for the index to return to where it was trading before the selling in May. The index then went on to reach new highs before this latest sell-off.
There are several mid-tier economic reports due out in the week ahead: consumer inflation, retail sales and consumer sentiment among them. Congress is on summer recess. Earnings season is quieting down. Overseas, Germany reports its second-quarter results. Europe’s largest economy is expected to have shrunk between April and June. And more economic data likely will be released by China.
Investors will be looking in many directions for direction in the week ahead.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView