Sun and sand make their siren call in August, tempting investors to a remote island or perhaps a crowded European beach. After all, summer tends to be a quiet time for stock markets with low trading volumes, or at least that’s what holidaying investors like to think.
But what happens if unexpected economic news or currency trends trigger sharp stock market moves, asks Colin McLean, managing director of SVM Asset Management? It has happened before. This time two years ago, world markets were in turmoil as the credit crunch began to bite, and August was an abysmal month for hedge funds as they hit summer blues and most hedge strategies failed to perform.
In July and August 2008 there was a sharp market rotation from resources to financial stocks, while this summer’s surprise is a continuing strong recovery in commodity prices, driven by encouraging growth in China, Mr McLean reminds us.
But whether the markets head north or south, Mr McLean recommends staying cool and avoiding any hasty decisions. So just in case there is a really big surprise over the next few weeks, shake the water out of your eyes, make sure your laptop screen is not obscured by the sun, and take a deep breath before pressing send.