Man sitting by the pool looking at market charts on his laptop computer. Tag reads "Expert Take".

Monday is Memorial Day, the unofficial start of summer. Usually, Memorial Day weekend marks pool openings, BBQs, beach trips, and the beginning of warmer weather. It’s also typically the first weekend of the stock market’s summer break, when investors tend to focus a little less on the markets and a little more on vacations and other summer plans. That can often lead to less trading, or lower volumes of shares changing hands, which is why “sell in May and go away” is a popular investing axiom.

This summer may look a little different, though. Pools are closed in some areas, vacations have been cancelled, and sporting events have been put on hold. Retail investors have flooded into the market, and Wall Street may be more inclined to trade its summer Fridays for extra time at home. Maybe this summer will be different?


Chart shows S&P 500 average stock performance from 1990 to 2019 and reflects dips in June, July and August, while continuously trending upwards throughout the year

History as a Guide

As far as performance goes, history shows the period between Memorial Day and Labor Day has been one of the weakest stretches of the year for U.S. stocks. Since 1990, the S&P 500 has risen an average of 0.4% between Memorial Day and Labor Day each year, compared to 4% average returns in the months before Memorial Day and after Labor Day. But some summers can be better than others.

Some of the biggest stock-market meltdowns have occurred in the summer months, showing that a wave of sentiment can take over slow markets. The S&P 500 plunged 11.3% in summer 2001 and 15.5% in summer 2002 as investors grappled with the tech bubble bursting. The benchmark then slid 11.8% in summer 2011 when Standard & Poor’s cut the U.S.’ credit rating. Summer volatility resurfaced in 2015 as the S&P 500 slid 9.6%, plagued by Greece’s financial woes and China’s currency devaluation.

Lately, that trend has changed as stocks have held up well in recent summers. The S&P 500 has risen from Memorial Day to Labor Day for four straight years, the longest streak of summer gains since 1995. Of course, it’s worth noting stocks were in the latter stages of a record-long bull market during this period.

Limited Volume

Life tends to slow down in the summer, and stock trading has been no different. Volume decreases, the news flow typically dies down, and Wall Street flips its out-of-office messages on. July has been the slowest month for volume over the past 10 years, averaging about 6.7 billion shares traded every day (compared to an average of 7.3 billion shares per day overall during that 10-year period). August’s volumes have been fairly muted as well, averaging 7 billion shares per day over that period.

Chart shows the average number of equity shares traded per day on public exchanges during each month of the year. In March 2020, nearly 16 billion shares were traded compared with and 8 billion in 2019. In April 2020, about 13 billion shares were traded, compared with 7 billion in 2019. In May 2019, around 8 billion shares were traded, compared with about 11 billion in May 2020.

As we discussed, less trading hasn’t always equated to calmer markets. Small shifts in buying or selling could cause noticeable market swings, especially when news breaks.

A Different Feel

Historical thin trading and soft performance don’t have to put a damper on your investing goals this summer. While it is too early to call, there are signs that this summer may be different. For one, the surge in new investors, lured in by the S&P 500’s historic selloff (and recovery), could keep volume robust throughout the summer. Over the past three months, volume has been at historically high levels (see chart above). Ally Invest’s trading volumes have more than doubled this year, so it’d take a steep drop-off for our volumes to fall back to their historical averages.

Some parts of the economy remain slow to reopen (especially in financial hubs like New York City) and consumers may remain cautious when it comes to reentering the economy, potentially leading to investors having more time to be engaged in the markets than they typically are this time of year.

At the same time, uncertainty about the trajectory of the economic recovery could drive volatility in the market, even if this recession’s worst days are likely behind us.

These next few months we could see a continuation of the push-and-pull between bulls (the optimists) and bears (the pessimists) as the economy reopens, policymakers reassess stimulus measures, and drugs to combat coronavirus are developed.

Thus far, 2020 hasn’t gone as planned, and it is unclear if the historical, seasonal trends of the past will hold true once again.

This Memorial Day and every day, thank you to all who have served our country.

The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.

Speech bubble icon next to text "Expert Take"

Headshot of Lindsey BellLindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.

Lindsey holds a passion for teaching individuals how to become successful long-term investors. She frequently shares her knowledge as a guest on national news outlets such as CNBC, CNN, Fox Business News, and Bloomberg News. She also serves on the board of Better Investing, a non-profit organization focused on investment education.