August has long been a month of dread for financial markets. Often seen as a time for calm, it has repeatedly been the stage for some of the most dramatic market crashes and economic crises in history.
This year, fears of a U.S. recession and the biggest one-day drop in Japan’s stock market since 1987 have already set alarm bells ringing. Historically, August’s quiet trading volumes and absentee leadership leave markets vulnerable to sudden swings, turning minor issues into full-blown crises.
Notable past August disasters include Iraq’s invasion of Kuwait in 1990, which tripled oil prices, and Russia’s financial collapse in 1998. August 2007 marked the beginning of the global financial crisis when BNP Paribas froze its hedge funds, triggering a panic that led to the Great Recession.
Henry Allen of Deutsche Bank points out that volatility often spikes in late summer, making August a dangerous time for markets. As we’ve seen before, what starts as a calm month can quickly spiral into financial turmoil.
