For Markets, August Often Surprises

Ah, August--when most investors are supposed to be at the beach, on the lake or in the mountains. It ought to be a dull month for stock and bond markets, yet in recent years it has been anything but.

Indeed, August’s penchant for surprises in this decade has forced investors to pay attention, wherever they may be:

* August, 1990: Iraq invades Kuwait, and a bear market is born on Wall Street. The Dow industrial average plummets from a then-record 2,999.75 on July 17 to 2,614.36 by Aug. 31, a sickening decline of 12.8%.

* August, 1991: A coup attempt in the old Soviet Union shaves a fast 100 points from the Dow between Aug. 15 and Aug. 19, but the government of Mikhail Gorbachev quickly foils the coup, and the market rockets to new highs by the end of the month.

* August, 1992: After George Bush’s non-performance at the Republican National Convention, the markets come to grips with the likelihood that Bill Clinton will be elected in November. The Dow falls from nearly 3,400 at the start of the month to 3,232 just after the Republican convention, as interest rates turn up.

* August, 1993: A manic rally takes hold in the bond market, pushing yields to generational lows on investor expectations for snail’s-pace economic growth. The 30-year T-bond yield, 6.5% at the start of the month, is under 6% by the end of the month, for the first time ever. The Dow rises from 3,560 to 3,650 during the month.

But is August really any more fitful for markets than other months? Probably not. It may just seem that way to many investors because they’re roused from what should be relaxing getaways.

It’s also true, however, that the markets are potentially more volatile in August precisely because so many people are away from Wall Street: When liquidity is thin, market swings naturally can be much wilder than normal. So August can be a good month for opportunistic traders.