Market Alert: Identified Month Delivers Highest VIX Surges in Stock Market
The post-election period often brings a recovery and growth phase for the S&P 500, with the index historically bottoming around early April and entering a rally phase, showing positive returns for the rest of the year [1][3]. However, market caution is warranted during August and September, as these two months present recurring challenges for the S&P 500.
Over the past 30 years, August and September have shown an average decline of about 0.7% each, in contrast with gains seen in other months of the year [2]. This seasonal trend, known as the "August-September slump," is a cause for concern as the market faces the potential for market corrections.
August, in particular, has a reputation for being a volatile and risky month, especially in post-election years. The month has seen several significant market shocks and elevated volatility, with events such as the 1990 Iraq invasion, 1997 Asian financial contagion, 1998 Russian default, 2010 European banking crisis, 2011 US debt downgrade, 2015 Chinese yuan devaluation, and the hawkish pivot at Jackson Hole in 2022, all occurring or impacting markets in August [4].
The VIX (Volatility Index) often spikes during August, signaling increased investor fear and risk perception [4]. For example, in early August 2025, weak jobs data and negative tariff news led to a 1.6% one-day decline in the S&P 500, reminiscent of prior August volatilities [4].
Key risk indicators during this period include narrowing market breadth, where fewer stocks contribute to gains and there is a notable decrease in breadth during late summer [5]. Volatility spikes and large single-day moves also tend to accumulate in August and September, signaling increased downside risk.
Despite the traditional defensive nature of sectors like consumer staples, they are showing stretched valuations. The Levkovich Index is flashing elevated levels, historically preceding pullbacks or sharp corrections. The put/call ratio is on the rise, indicating more traders are betting on downside moves.
Margin debt has surged, a classic late-cycle signal. The S&P 500 Index has increased by over 24% in the past four months. Based on the Shiller PE ratio and the Buffett Indicator, the S&P 500 is now more expensive than nearly any time in modern history, second only to the 2000 dot-com Bubble.
The Cboe Volatility Index (VIX) shows a similar pattern, bottoming in late July and ramping up throughout August and September. The S&P 500 Index typically peaks in early August and shows weakness continuing through September.
In light of these trends, it's crucial to craft a risk management plan. Utilizing tools such as the Put/Call Ratio, RSI & MACD Indicators, Seasonality Charts, and Valuation Multiples can help investors navigate the potential risks.
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[1] Historical S&P 500 Performance Post-Election [2] August and September as Weakest-Performing Months for U.S. Equities [3] Post-Election Year Market Trends [4] August Market Volatility: A Historical Perspective [5] Market Breadth and Risk Indicators
Investors should be cautious during August and September, as these months have historically displayed a downward trend in the S&P 500, with an average decline of about 0.7% each [2]. This seasonal trend, known as the "August-September slump," presents a potential for market corrections, particularly with the VIX (Volatility Index) spiking during this period [4]. Therefore, it's essential to craft a risk management plan and employ tools such as Put/Call Ratio, RSI & MACD Indicators, Seasonality Charts, and Valuation Multiples to navigate these risks [6].
