Bank of America has issued a sobering reminder to investors that August has historically been one of the worst months for U.S. equities, with the S&P 500 posting positive returns only about 55 percent of the time since 1928 and average gains near zero.
The warning, circulated in late July as markets prepared for the late-summer trading period, adds to a growing chorus of strategists cautioning that the calm surface of equity markets may be cracking. While corporate earnings have been solid and AI-related investment continues to drive optimism, seasonal headwinds and lingering macroeconomic uncertainty could test investor resolve in the weeks ahead.
According to Bank of America's analysis, the August-through-October stretch has produced some of the most significant drawdowns in market history. Average returns during the period have been near flat, and the frequency of sharp corrections has been notably higher than in other months. The bank advised clients to prepare for potential volatility rather than assume the first-half rally would continue uninterrupted.
The caution arrives as the S&P 500 hovers near record levels, supported by strong earnings from technology and semiconductor companies. However, concerns about stretched valuations, geopolitical risks, and the Federal Reserve's uncertain policy path have kept volatility elevated. The CBOE Volatility Index, known as the VIX, has shown signs of awakening after a prolonged period of subdued readings.
Other Wall Street firms have echoed similar concerns. MarketWatch reported that the market's calm surface is cracking, with preparations advised for possible shocks. The upcoming week of August 3 through 7 will bring the July jobs report, manufacturing data, and additional corporate earnings that could set the tone for the month.
Despite the seasonal warnings, longer-term optimism persists. Many strategists still forecast double-digit equity gains for the full year, citing robust earnings growth and the transformative potential of AI infrastructure spending. For now, the message from Bank of America is not to panic but to remain vigilant as markets enter a historically treacherous stretch.
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