August once again lives up to its dismal reputation for stocks

Wall Street is really suffering through the dog days of August.

The S&P 500 is down more than 3% this month, on pace to snap a five-month winning streak. The broader market index is also on track to post its worst monthly performance since December, when it lost 5.9%.

The Nasdaq Composite is also headed for its biggest one-month loss since December, falling 5.2%. The Dow Jones Industrial Average has declined 3% in August.

These pullbacks are a contrast to the market rally seen earlier this year. The Nasdaq Composite had its best first-half performance in 40 years in 2023. The S&P 500’s gains over the first six months of the year marked the index’s best start to a year since 2021.

There are several things pressuring Wall Street now, ranging from seasonal factors to concerns about the global economy and the Federal Reserve. Here’s a breakdown.

This behavior at this time of the year isn’t out of character.

Over the past 10 years, the S&P 500 has averaged a gain of just 0.1% for August — making it the third-worst month for the index, CNBC Pro analysis of seasonal trends showed. Go back 20 years and the performance gets worse: The S&P 500 has averaged a monthly 0.1% loss in that time.

There are several reasons the market tends to see lackluster performances this month, including:

• Lower trading volumes: Trading tends to decline in August as traders and investors go on vacation before the summer ends. This can lead to more volatile swings in prices.
• Booking profits before September: While August is a tough month for Wall Street, it has nothing on September — historically the worst of all months for the market. The S&P 500 has averaged a 0.5% loss in September over the past 20 years. Over the past 10 years, the S&P 500 has fallen an average of 1% each September.

“The S&P 500 continues…