Author: Casey Wagner, Blockworks; Translated by: Deng Tong, Golden Finance

As we approach the end of July, analysts are starting to look ahead to August, a historically volatile month made even more interesting this year by the U.S. presidential election.

The S&P 500 and Nasdaq Composite fell 1.6% and 2.1%, respectively, in August 2023. Last August, the S&P 500 fell less than 1% and the Nasdaq Composite fell 4.6%.

The CBOE Volatility Index (VIX) has most often peaked in the first half of the past eight presidential elections. Given the uncertainty surrounding this year’s presidential election, volatility in 2024 could peak later than usual, analysts said.

The VIX is 17.3 at the time of this article’s publication and has risen more than 20% in the past five days to its highest level since the spring. As of 2024, the VIX peaked at 19.2 in April.

The VIX’s rise was to be expected given the upcoming Federal Reserve policy-setting meeting, Democratic delegate votes and earnings season. However, it still has not reached 20, a level that has historically been seen as a key indicator of heightened volatility.

The market seems confident that central bankers will begin a rate-cutting cycle in the fall, and representatives have all but confirmed Vice President Kamala Harris will succeed President Joe Biden, so investors may not be too concerned about the coming months.

Investors will also be looking ahead to October, when speculation about the presidential election will also peak as campaigns make one last effort to woo voters and early voting begins.

In October 2023, the S&P 500 and Nasdaq Composite fell 2.1% and 2.8%, respectively.

Still, as Jessica Rabe, co-founder of DataTrek Research, points out, the stock market tends to peak in the final quarter of the year. For more than four decades, the S&P 500 has hit new highs in the fourth quarter.

Stocks have delivered double-digit returns through the first six months of the year, with the S&P 500 and Nasdaq Composite up about 15% and 18%, respectively. Rabe said that historically, a strong first and second quarter for stocks has led to a slowdown in the second half of the year.

“After a double-digit first-half gain, the S&P tends to slow in the second half, so most of the index’s gains for the year may have already been realized,” Rabe explained. “That said, the S&P is only up 1.7% so far in the second half of the year, compared to an average gain of 6.7%, so history suggests there is still room for the index to run higher.”