☀️ Keeping cool in summer markets

Hey hey, happy Monday (from a metal tube in the air).

I’m on my way to Chicago to hang with the Compound crew and celebrate the opening of Ritholtz’s new office in the Salt Shed. And I’ll be chatting with my colleagues Michael, Josh and Ben at a LIVE taping of The Compound and Friends! Hope to see you there.

This week, a 5-minute missive on how the stock market acts in the summer (and why you could find it hard to check out on vacation).

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I’m always honored when you all read my writing.

But this week, I’m feeling especially honored.

Because I know you’re not reading this at your desk. You’re on the beach or by the pool, sipping some delicious fruity drink with a little umbrella. Or you’re adventuring through Europe, or at your daughter’s end-of-year ballet recital.

Your mind is not on your investments. And frankly, after the year we’ve had, you probably want a break from all of this.

All of Wall Street does, I can tell you that. Portfolio managers – the ones glued to their screens most days of the year – are putting up their out-of-office messages and hopping on that jitney to the Hamptons. They’re humans too, and they crave a vacation.

That’s summer for you. The world stops for a while as we bask in the sun with friends and family. In investing world, trading volumes drop – sometimes as much as 18% – and portfolios go on autopilot.

I mean, I don’t know a single person who can place a trade in one hand while balancing a pina colada in the other. We prioritize R&R, not P&L.

And in the absence of chaos, the stock market simply drifts higher. Or at least that’s been the pattern in recent summers.

The S&P 500 — that oft-cited index of America’s 500 largest public companies — has increased between Memorial Day and Labor Day in eight out of the past nine years. 

Take that stat at face value, and you could say we’re in a stretch of summer slumber we haven’t seen since the early 1990s.

Contrary to that stat, though, there’s more to summer markets than smooth, friendly waters.

What if I told you that the stock market has had at least one summer storm (a one-day drop of 1%* or more) in every year since 1979?

Or that the S&P 500 has been engulfed in a 5%+ selloff for at least part of the last six summers?

Both are true. Summer may often be quiet, but chaos can roar back quickly. Fewer transactions and lower volumes can lead to air pockets for prices if surprising headlines hit. 

And we all know the narrative machine never takes a vacation (side note: somebody please take the commander-in-chief’s phone and yeet it into the ocean for my sanity).

Wall Street has found itself in a precarious spot this particular summer. The job market is weakening, and confidence is fragile (even if the vibes are slightly better today than they were two months ago). 

Spending habits depend on income, and many of our primary incomes come from our jobs. Jobless claims are rising, and we still don’t have a good idea of how companies have adjusted their workforces in light of tariffs and government policy. If you believe the job market is the key to the economy – as I do – you’re probably gritting your teeth right now.

Amid all of this, the Federal Reserve – that group of interest-rate nerds up in D.C. that most certainly needs to log off and sail away – doesn’t have the clarity it needs to help the economy. We can’t rely on Jay Powell’s sweet, soothing promises of rate cuts to help us if the job market slips or tariff challenges heat up.

Not only that, but we have some important deadlines looming for policy.

For one, Congress is pushing to finalize that big, beautiful budget bomb by July 4. The bill includes a resolution over the debt ceiling limit because the federal government is about to run out of money.

Ah, debt ceiling fights. Analysts everywhere are canceling their cookouts.

I’m not telling you this to stir up worries or to encourage you to swipe into your brokerage app on your cruise.

I’ve just seen too many people fall into the trap of checking out in these quieter months. Naively believing everything will be fine because the sun is out, only to scramble back when a yen carry trade gone wrong causes a swift plunge in stock prices.

You laugh, but remember last summer?

Volumes in June were 13% below the prior five months’ average during what was one of the quietest months in history. July caused some angst as Wall Street prepared for rate cuts. Then, on August 8, the S&P 500 dropped as much as 4%, and volume for the day jumped to 40% higher than the daily average year-to-date. 

It’s the summer curse.

You want to get away. So does everyone else…until that small shift turns into a big wave.

You can’t just bury your head in the sand and expect your brain to cooperate. You have to stay connected, process the changes, and not dwell too much on what you can’t control. Set your investments up so you can handle what’s thrown your way while keeping your short-term needs in mind.

Here’s the good news.

At OptimistiCallie, we’re not scared of a little summer storm.

We love dancing in the rain.

We know our lofty long-term goals can withstand more than a selloff, 80% of which turn out to be inconsequential blips on the radar.

We understand that we have full agency to prepare for a storm, including investing in assets that help us sleep at night (even if they aren’t the sexiest trades to brag about at a pool party).

And even though you (we!) may be nervous, we know nothing in markets – or life – is a foregone conclusion.

Except that I’ll be in your inbox every Monday morning, dutifully breaking down all the madness.

Thanks for reading!

Callie

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