Bank of America issued a defensive warning for August: historical data shows that the S&P 500 was the weakest during this period, and the dollar and gold became the best safe haven

The Zhitong Finance App learned that as investors enter August, they may need to hold the steering wheel with one hand and prepare hedging tools — this is the core view of Bank of America Securities technical strategist Paul Ciana in the latest seasonal report. Based on decades of market data, the report indicates that judging from historical rules, the market will tend to be defensive in the next three months. According to the data, August to October has always been the weakest three-month rolling cycle for the S&P 500 index, while the US dollar, gold, and bonds often outperformed the market during the same period.

August has always been unfriendly to equity assets

The report shows that since 1928, the three-month average performance of the S&P 500 index from August to October was the worst. Within this range, the probability of the index rising was only 55%, the average return was close to zero (-0.02%), and the average retracement reached 7.35%, the highest among all three-month rolling cycles. This historical pattern is consistent with the defensive stance that Bank of America has maintained since the end of May.

However, Ciana also cautioned that weaker seasonality does not mean long-term bearishness. Historically, the late-summer pullback often paved the way for the strongest phase in the market that followed — the S&P 500 index rose by an average of 3.54% from November to January of the following year.

The dollar may rise or continue

At the same time, the report points out that August usually creates a favorable environment for the US dollar. Among developed market currencies, the US dollar is particularly prominent against the British pound and Australian dollar. Since 2000, the probability that the US dollar will appreciate against the British pound in August is 65%, and 69% against the Australian dollar. If you add the factors of the second year of the US presidential cycle (currently in this phase), the seasonal trend is even more pronounced.

In emerging markets, the South African rand is the weakest seasonally. The probability that the dollar will appreciate against the rand in August is as high as 73%, with an average increase of 2.19%. This makes USD/ZAR one of the recommended seasonal trading combinations by Bank of America, especially when the market shifts to a safe-haven model.

The decline in bond yields is in line with seasonal patterns

The report also found that August had a historical trend of driving government bond yields lower. US 30-year Treasury yields mostly declined in August, especially in the second year of the presidential cycle. About three-quarters of the observation year fell, with an average drop of 18 basis points. The decline in Australian 10-year Treasury yields is more consistent; the probability of falling in August reached 73%. Lower yields are usually accompanied by a defensive investment environment, and investors seek the relative safety of government bonds.

Gold highlights defensive value

Among major macro assets, gold was one of the clearest beneficiaries during the late summer period. Since 1992, the probability of gold rising during the August to October window is 61%, with an average increase of 2.52%. Historical data shows that gold tends to strengthen when the stock market weakens and treasury bond yields decline, so it has become the report's preferred hedging tool for seasonal stock market fluctuations.

The Dow is more resistant to falling than other stock indexes

Not all stock benchmark indices show the same seasonal weakness. The Dow Jones Industrial Average (DJI) has always been the most resilient major stock index in August. The probability of an increase of 62% and an average increase of 0.86%. In contrast, Hong Kong's Hang Seng Index (HSI) performed the weakest, with a probability of falling 57% and an average decline of 1.3%. Historical data also showed that the overall international market outperformed US stocks in August.

The energy sector may buck the trend and strengthen

In the overall safe-haven tone, the energy sector is a major exception. The Bloomberg Energy Index recorded an average increase of 2.42% in August, performing even better in the second year of the presidential cycle. The report also pointed out that crude oil prices generally tend to strengthen in the last three weeks of August, which may provide additional support for energy-related investments.

Ciana stressed that seasonal factors are only one of many references, but historical evidence shows that August often rewards defensive allocations, increases exposure to dollars and gold, and remains cautious about the stock market until the market enters a historically strong cycle from November to January of the following year.