August 2026 Off to a Hot Start: Trump Puts August’s Bearish Reputation to the Test

August’s historical weakness has often been “Trumped” during the President’s first term, again in 2025, and especially during the previous midterm year of 2018. On July 24, we examined whether President Trump could once again defy August’s historically bearish reputation. Three trading days into August 2026, the market is running hotter than either historical comparison, suggesting that so far, he is doing exactly that.

However, bigger, faster advances often carry greater giveback risk. The more powerful the move higher, the greater the potential amplitude of the pullback. The market is already softer today, August 6 — consistent with the seasonal dip phase kicking in, possibly sharper than usual given how far the market has run in three days. August is defying its reputation—but the speed and structure of the rally are creating new risks.

The risks we flagged on 7/24 are still live: the unresolved Iran conflict, elevated valuations, and broader seasonal and midterm election year headwinds. A great deal of “hope” has been embedded in the rally of the past few days—hope for a lasting resolution to the Iran War and the reopening of the Strait of Hormuz. Hope is not one of our strategies and we are not seeing any all-clear signals out of the Persian Gulf or the Israel/Lebanon front.

We're also seeing echoes of August 1998 mini-bear during the Asian currency crisis and LTCM hedge fund debacle now: fresh concerns involving the yen and Japan’s currency market, rising chatter around leveraged ETF positioning, and an AI trade that's increasingly overbought and crowded. None of that guarantees a repeat, but the mechanics — outsized gains, leveraged positioning, a crowded trade, currency stress — rhyme.

Bottom line: the base case is still a seasonal dip playing out mid-month, in line with the typical Trump-year pattern. Given how strong the run-up has been, and the risks in play — yen, leverage, crowding, Iran — that dip could be sharper than a garden-variety pullback. Not a bear-market call. Just some typical August, midterm-year Q3 weakness ahead of the seasonal and 4-year cycle Sweet Spot that begins in October. The market has decisively outrun the historical August pattern, but that very strength may be setting up a sharper-than-usual seasonal pullback.

NASDAQ's Rare Four-Day Surge Ends—What History Suggests Comes Next

NASDAQ's impressive run of four consecutive daily gains of more than 1% came to an end today as the index finally paused. While the streak is over, its significance remains. Since NASDAQ's inception in 1971, this is only the 18th occurrence of four straight 1%+ daily advances, underscoring just how rare such sustained buying pressure has been.

As the accompanying table illustrates, the 17 prior occurrences have generally been associated with periods of strong market momentum. On average, the four-day surge produced an 8.33% gain before ending. While some short-term digestion is common, the historical record remains constructive. One week after the streak ended, the NASDAQ advanced 70.6% of the time with an average gain of 1.32%. One month later, the index was higher in 70.6% of cases with an average gain of 3.78%.

The longer-term statistics become even more encouraging. Three months after the streak, the NASDAQ posted an average gain of 9.48% and was higher in more than 82% of prior occurrences. Six months later, the average gain improved to 19.03%, while one-year returns averaged an impressive 26.61%, with winners outnumbering losers by more than three to one.

Several previous occurrences unfolded during major bear markets, including 2001 and 2022, reminding traders and investors that powerful rallies can occur within broader downtrends. Still, these rare momentum bursts have historically signaled persistent buying interest rather than exhausted markets.

With the latest streak now in the books, traders and investors may want to see whether this pause proves to be a brief consolidation before another advance or the beginning of a more meaningful bout of profit-taking. If history is any guide, the odds continue to favor higher prices over the intermediate and longer term, even if near-term volatility returns.

Early August Market Strength Defies Seasonal Script

August has a well-earned reputation for testing traders’ and investors' resolve. As the chart illustrates, the recent 21-year averages (2005–2025, solid lines) and the longer midterm-year pattern (1950–2025, dashed lines) both typically point to weakness during the first third of the month before a modest rebound around mid-August. Historically, traders have been wise to approach early August with caution.

This year, however, the market has largely ignored the seasonal playbook.

Instead of following the typical early-month decline, stocks have shown surprising resilience, thanks in large part to an easing of geopolitical concerns. The pause in the Iran conflict has allowed crude oil prices to move briskly lower. That decline in oil has also eased some inflation concerns and helped fuel renewed risk appetite across equities.

While this divergence from seasonal norms has been impressive, investors should remember that seasonal tendencies can be overridden. Unexpected macroeconomic and geopolitical developments can temporarily overwhelm historical patterns, just as they have this August.

The key question now is whether this positive catalyst has merely delayed the usual seasonal weakness or fundamentally altered the market's trajectory. With August and September historically among the year's most challenging months, it remains prudent to stay disciplined and monitor both technical conditions and evolving headlines. A strong start to the month is certainly encouraging, but history suggests traders may not want to become complacent simply because this year's August has begun differently than most.

August First Trading Day: S&P 500 Down 12 of last 15

On page 90 of the Stock Trader’s Almanac 2026, it is shown that the first trading days of each month combined have produced an outsized share of the market’s overall gains. However, the first trading day of August does not contribute to this phenomenon ranking last. In the upcoming 60th Anniversary edition of the Almanac for 2027 August’s first trading day is still the worst and the largest decliner. In the past 21 years S&P 500 and DJIA have risen just 33.3% (up 7, down 14) of the time on the first trading day of August. A few sizable gains in advancing years have mitigated the damage with average performance remaining fractionally negative across all three indices. Over the last two years, DJIA, S&P 500 and NASDAQ all declined by over 1.2%. NASDAQ was the weakest, down 2.3% in 2024 and 2.2% in 2025.

Semiconductor (SOX) Seasonal Weakness Could Accelerate Its Mean Reversion

Semiconductor stocks have been among the market’s strongest performers in 2026, but the calendar is signaling a more seasonally challenging period is underway. As the chart illustrates, the PHLX Semiconductor Index (SOX) tends to enter a seasonal slump after reaching its typical seasonal high usually in July, creating a potentially vulnerable stretch for chip stocks and the broader technology sector.

The 2026 pattern (solid black line, right axis) could be particularly noteworthy. SOX surged sharply into an earlier high in June and has been pulling back since, and yet, remains well above average compared to the last 31 years. If the market follows its historical seasonal tendencies, the current pullback in semiconductor stocks could persist through the remainder of summer, possibly lasting until late October.

Because semiconductors are a major component of the technology sector and an important driver of NASDAQ performance, a seasonal downturn in SOX could also have broader market implications. Traders and investors should consider monitoring semiconductor leadership closely as summer progresses now that seasonal tailwinds are turning into headwinds setting the path for a potentially quicker reversion to the mean.

A seasonal slump may create volatility, but it can also produce opportunities for disciplined traders and investors willing to wait for improved entry points. Monitoring support levels, earnings guidance, sector breadth, and relative strength will be especially important as the semiconductor industry moves through the historically challenging stretch from August into October.

August: A Historically Challenging Month for Stocks—2nd Worst Month

August has often been a challenging month for the stock market, and the data from 1988 through 2025 reinforces that seasonal caution. Ranked 11th among the calendar months, August has produced mixed results across the major indexes, with gains occurring only slightly more often than declines.

DJIA and S&P 500 each finished August higher in 21 of the past 38 years, or 55.3% of the time. Yet their average August performance remains negative, at –0.7% for the DJIA and –0.5% for the S&P 500. Russell 1000 also posted an average loss of –0.4%.

NASDAQ has fared somewhat better, advancing 57.9% of the time with a modest average gain of 0.1%. Small caps, however, have struggled, with Russell 2000 higher just 52.6% of the time and averaging a –0.4% decline.

Contributing to this poor performance since 1988 was the second shortest bear market in history (45 days) caused by turmoil in Russia, the Asian currency crisis and the Long-Term Capital Management hedge fund debacle ending August 31, 1998, with the DJIA shedding 6.4% that day. DJIA dropped 1344.22 points for the month, off 15.1%—which is the second worst monthly percentage DJIA loss since 1950.

Saddam Hussein triggered a 10.0% slide in August 1990. The best DJIA gains occurred in 1982 (11.5%) and 1984 (9.8%) as bear markets ended. Additional recent DJIA August losses in excess of 4% were in 2010, 2011, 2013, 2015, and 2022.

With August historically ranking near the bottom in market performance, traders and investors may want to temper expectations and remain alert for increased volatility as summer winds down.

Can Trump Defy August's Bearish Reputation Again?

In the chart above, we've isolated August market performance during President Trump's first term (2017–2020), 2025, and his previous midterm year, 2018. Overall, performance has been noticeably better than August's bearish reputation suggests, but the pattern itself is nothing new. Typical August seasonality still prevails, with greater weakness during the first half of the month followed by a much stronger second half.

President Trump's policy announcements have repeatedly demonstrated an ability to knock the market lower, only to quickly reverse course and spark another "TACO Trade" rally. This time, however, it appears increasingly difficult for the administration to quickly pause, resolve, or de-escalate the conflict with Iran.

The historical pattern is certainly encouraging, but today’s backdrop of geopolitical uncertainty, elevated valuations, and other macro headwinds suggests August 2026 may not follow the same script.

Summer Rally Fading—Historically Weakest of All

Using Stock Trader’s Almanac definitions (page 76 of 2026 edition), the Summer Rally runs from the DJIA’s closing low in May or June to its subsequent Q3 closing high. As of the close on July 21, DJIA’s Q3 closing high was 53055.91 on July 6 and its May or June closing low was on May 4 at 48941.90 yielding a modestly below average 8.4% summer rally so far this year. Applying the same parameters to S&P 500 and NASDAQ, results in summer rally gains of 5.2% and 4.8% respectively. Also, below historical averages.

As the accompanying chart shows, this seasonal advance can deliver solid gains but historically, it has also been the weakest of the four major seasonal rallies. That makes the current market particularly interesting. Summer momentum can create opportunities, but history also suggests investors should pay close attention as July gives way to the traditionally volatile months of August and September.

This is exactly where seasonal market intelligence can give investors an edge. Stock Trader’s Almanac has been tracking these recurring patterns for decades, helping traders and investors identify when the market tends to perform best and when caution may be warranted.

The Summer Rally may have more room to run, but the seasonal clock is ticking. Knowing what history says could happen next may be just as important as knowing what is happening now.

DJIA Down Friday/Down Monday: A Key Level to Watch

DJIA logged its sixth Down Friday/Down Monday (DF/DM) of 2026 earlier this week, and according to research in Stock Trader’s Almanac (page 78 2026 edition), this is a market signal worth watching.

A DF/DM occurs when DJIA declines on both Friday* and the following Monday**. While this pattern does not guarantee an immediate selloff, Almanac research has found that these occurrences have frequently marked market inflection points and have historically been followed by weakness at some point during the subsequent 90 calendar days. The market can, and often does, bounce shortly after a DF/DM (like it did today), but past rallies have sometimes proven temporary.

The latest occurrence also comes at an interesting juncture. DJIA fell sharply on Friday, July 17, as the major averages suffered their first significant weekly setback in several weeks. The decline was accompanied by weakness in technology and semiconductor shares, while geopolitical concerns and rising oil prices added to trader/investor uncertainty.

Monday's market action initially suggested that investors were willing to step back in and buy the dip, but that failed. The bigger question is whether today’s strength can develop into sustained upside or simply represents the type of short-term bounce that has historically followed many DF/DM signals.

The accompanying chart provides an important perspective. It tracks the market's performance around the previous 271 DF/DM occurrences since 2000 and separates instances where DJIA’s Monday close was breached from those where it was not. Out of 271 DF/DM, Monday’s close was not breached just 32 times or 11.8% of the time.

The data highlights a key distinction. When DJIA did not close below its Monday close during the following 90 calendar days, DJIA historically went on to perform substantially better, with gains building over the subsequent several weeks and months. In contrast, when the Monday close was breached, subsequent performance was considerably weaker. DJIA remained close to flat in the early weeks and produced only meager gains on average over the following 60 trading days.

This suggests Monday’s DJIA close of 51,839.26 is an important level to watch. If the market can hold above that level, the historical pattern suggests this week’s DF/DM could ultimately prove to be little more than a temporary setback. But if DJIA closes below its Monday close, history suggests the risk of additional weakness increases.

*Friday or the last trading day of the week. **Monday or the first trading day of the next week.

Has the Midterm Pattern Overtaken the Trump Cycle?

When we identified the Trump Presidency Seasonal Cycle back in March, the usual midterm year Q2-Q3 Weak Spot got pulled forward into Q1 by the Iran War — classic Trump Q1 shock-cycle fashion. Then the ceasefire rally drove the market to new highs.

Now the AI Super Boom trade has gotten stretched, hostilities have ramped up in Hormuz, and we're entering August/September — NASDAQ's weakest two-month stretch. With midterm elections around the corner, the market is likely to weaken through the back half of the Four-Year Cycle Weak Spot, Q3 of the midterm year.

We're in the Weak Spot now, and July begins NASDAQ's Worst 4 Months. Midterm summers are for patience, not heroics. Don't fight it. Time to take some profits, cut losers, and get positioned for a better buying opportunity in late summer or early fall.

The April 8 ceasefire gap as an area that might get filled down around 22500, but that seems less likely now and would take some especially negative developments on the world stage or systemically in the market. A summer correction to 24000 near the October 2025 and January 2026 highs or a little above that is not out of the question, though. There's also another gap on April 16/17 — just above 24000, when Trump announced the Israel-Lebanon ceasefire — that's more likely to get filled should a summer correction ensue.

Summer Retreat Puts Seasonal Headwinds Back in Focus

As the market pushes through July, traders and investors should be mindful that history suggests the calendar becomes considerably less forgiving. Since 1990, August and September have consistently ranked among the weakest months of the year for U.S. equities, a pattern that has earned the nickname "Summer Retreat."

The historical averages tell the story. August has produced average declines in both the Dow Jones Industrial Average and the S&P 500, while NASDAQ has managed only a marginal gain. September has been even more challenging, with all three major indexes posting average losses over the past three-and-a-half decades. Among them, DJIA has historically fared the worst, while the S&P 500 and NASDAQ have also struggled to generate positive returns.

Strong bull markets can overcome historical tendencies, and unexpected economic or geopolitical developments can quickly change the market's direction. However, these recurring patterns serve as a valuable reminder that risk has historically increased as summer draws to a close.

With earnings season winding down and investors shifting their attention toward Federal Reserve policy, inflation data, and the return of institutional trading activity after Labor Day, volatility often increases during this period. That combination of weaker historical performance and renewed market participation makes August and September months that deserve heightened vigilance.

Rather than assuming the market's recent strength will continue uninterrupted, investors may want to review portfolio risk, tighten stop-loss levels where appropriate, and remain selective with new positions until the market works through its historically weakest stretch of the calendar.

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July Monthly Option Expiration: Weakest Friday, Modestly Better Following Week

July monthly option expiration has a reputation for producing choppy trading, and the historical data since 1990 largely supports that view. While expiration-related positioning by institutional investors and market makers can create elevated volatility, the impact has varied depending on whether investors focus on expiration day, the entire expiration week, or the week that follows.

Monthly expiration Friday has historically been the weakest period. DJIA and S&P 500 have each averaged a –0.35% decline on July monthly option expiration day, while NASDAQ has fared even worse with an average loss of –0.44%. All three indexes have finished lower roughly two-thirds of the time, suggesting traders might want to be prepared for some short-term weakness heading into expiration day.

Looking beyond Friday, the picture is generally more balanced. During July monthly option expiration week, DJIA has posted the strongest historical results, averaging a +0.38% gain with advances in 58.3% of all years since 1990. S&P 500 has been essentially flat (–0.04%), while NASDAQ has remained slightly negative (–0.13%), reflecting the technology sector's tendency toward greater volatility.

The week after monthly expiration has historically improved modestly. DJIA has averaged a +0.15% gain, S&P 500 has added +0.09% on average, and even NASDAQ, despite a slightly negative average return (–0.17%), has actually advanced in 52.8% of the years reviewed. This suggests that although a handful of outsized declines weigh on the NASDAQ's average, the market has more often than not found some stability after July monthly expiration.

July monthly option expiration can temporarily pressure the market, but any weakness has often proven short-lived as traders and investors quickly refocus on earnings season and broader market fundamentals.

Trump Seasonal Cycle, NASDAQ Style

Back in March we identified the Trump Presidency Seasonal Cycle, and 2026 continues to track the pattern closely:  rough Q1, targets get slashed, the Street panics, Trump reverses course and big rally ensues over for the rest of the year.

We’re seeing it with NASDAQ as well. June’s selloff and the “Christmas in July” Midyear Rally has brought 2026 back in line with the Trump Presidency Cycle.

Seasonality weakens after mid-July so expect another pullback and some sideways action over the August/September timeframe as the market digests incoming economic data and latest geopolitical and midterm election headlines.

July's Midterm-Year Pattern Continues to Offer a Constructive Roadmap

With the first several trading days of July now in the books, 2026 appears to be tracking the historical midterm-year patterns. DJIA had posted an above average start to the month until today, while the S&P 500 has generally followed its typical midterm trajectory. The NASDAQ has been somewhat softer than its historical pattern, and small caps, represented by Russell 2000, have lagged noticeably.

Historically, July has been one of the more favorable months of the year during midterm election cycles, particularly for the Dow and S&P 500. The seasonal tendency has been for gains to build through the middle and latter portions of the month, even if short-term volatility creates occasional pullbacks along the way. That remains the roadmap suggested by the long-term data.

The biggest divergence continues to be beneath the surface. NASDAQ has been somewhat softer than its historical midterm pattern, while Russell 2000 remains well below its seasonal average. That isn't entirely surprising. Small caps have historically been the weakest performers during July in midterm election years, and lingering concerns over inflation, interest rates, economic growth, and the Iran war continue to encourage traders and investors to favor larger, more established companies.

While no seasonal pattern is guaranteed to repeat, July's historical midterm-year tendency remains constructive. If the major averages continue to track their long-term midterm-year script, the market appears to still have room to advance before the calendar turns to the more challenging seasonal period that typically arrives later in the third quarter, usually in August and September.

After Down Q1 and 10%+ Q2, S&P 500 Is 6-for-6 the Rest of the Year

Following a negative Q1, the S&P 500's track record for the rest of the year is mixed. But when the market rebounds by more than 10% in the second quarter, the historical picture changes dramatically.

In the six prior occurrences since 1950 — 1968, 1980, 2003, 2009, 2020, and 2025 — the S&P 500 finished higher in Q3, Q4, the second half, and the full year. That's a perfect 6-for-6 record.

It's a small sample, but the magnitude of the Q2 rebound appears to matter. A modest bounce after a weak first quarter has offered little historical insight. But a double-digit second-quarter surge following a meaningful Q1 decline—like the one we've just experienced—has historically been associated with continued market strength through year-end.

None of this precludes a dip. August and September have a long history of producing volatility, and a pullback during the third quarter would not be unusual. This could be the year the 6-for-6 streak ends. But history suggests that when the market rebounds this powerfully after a first-quarter washout, the odds have favored additional gains through year-end.

Stocks Fizzle After July 4th

The bulls that run before the holiday don't show up after it. Volume stays thin as the long weekend clears out, and the buying dries up. Since 1980, DJIA, S&P 500, NASDAQ and Russell 2000 have all averaged net losses on the first trading day after July 4th.

Recent years have shown some improvement, but it's still no time to press the long side. Over the 15 years since 2011, trading right after Independence Day has been mixed and lackluster. The day after the 4th, DJIA has declined 11 times in 15 years — down 73.3% of the time, averaging −0.03%. S&P 500 has slipped 9 times (higher just 40.0%), though its average holds fractionally positive at +0.06%.

NASDAQ carries the best of the group, up 53.3% of the time the day after and firming as the week goes on. Russell 2000 is the weakest of the four — down 60% of the time the day after and averaging losses on both of the first two sessions past the holiday (−0.27% and −0.42%). Only by the third day out does the tape steady across the board.

The pattern holds: the pop comes before the 4th, the fizzle comes after.

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