Summer Swoon Unlikely as Markets Tiptoe into August

After climbing to fresh record highs in July and five-straight months of gains for the S&P 500, U.S. equity markets appear ready to take late-summer breather.

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Blame it on fund-manager vacations, an earnings recession, or reduced capital inflows, since 1945, August and September have been the worst month for stock-price returns, according to data from S&P Global Market Intelligence. Taking an early peek, this year is on track to be no exception.  U.S. stocks, which have mounted a near 19% snapback from February lows, posted declines during the first two trading days of the month.

Charles Reinhard, head of portfolio strategy at MainStay Investments, chalks up the slip to a consolidation of recent gains, and said there’s no indication the pullback will amount to a more meaningful selloff.

“Don’t be a hero and chase the market,” he advised. “As we settle down, fundamentals are supportive for single-digit returns.”

Helping to fuel the dip is renewed pressure in the oil patch as global crude prices trade below the psychologically-significant $40-per-barrel mark.

Over the prior two sessions, U.S. benchmark West Texas Intermediate crude prices lost $2.09, or just more than 5%, hitting the lowest settlement value since April. CME Group President Terry Duffy said investors should buckle up for more volatility as explorers, stealing confidence from the recent upswing in prices, continue to jump back into the market. As investors grapple with what more exploration means for the oversupplied oil market, prices are likely to see frequent fluctuations.

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