Traders at the Frankfurt stock exchange, Germany. (Illustrative photo: THX/TTXVN)The EURO STOXX 50 and DAX indices are consistently fluctuating near all-time highs, while the CAC 40 index remains very close to its historical peak. Despite this, historically, August has been one of the weakest trading months of the year for European markets.
That paradox raises a question that is far more fundamental and interesting than simply wondering whether investors should “sell in August.”
The actual data indicates that August isn’t always a bad month. On the contrary, its bad reputation is largely shaped by a handful of exceptional, unexpected market shocks.
European stock markets entered August 2026 in a way that could not have been more different from historical momentum.
The EURO STOXX 50 and DAX indices are at record highs, while the CAC 40 is holding firm near its peak. However, history shows that August is one of the worst months for the economy.
Germany’s DAX index, which tracks the 40 largest companies on the Frankfurt stock exchange, has shown a similar story since 1970: August saw an average decline of 1.03%; September saw an average decline of 1.64%.
The French CAC 40 index, which tracks the 40 largest companies in Paris, has data dating back to 1988. August saw an average loss of 1.22%. September saw an average loss of 1.38%.
Three indicators from three different countries, spanning three different historical periods – yet yielding an absolutely precise ranking: September was the worst, followed by August.
However, the events of August 2026 completely defied that pattern.
On August 11, 2026, the EURO STOXX 50 index closed at an all-time high, surpassing 6,560 points, marking an increase of approximately 13% year-to-date. The DAX index also surpassed 26,450 points for the first time in history, while the CAC 40 closed at around 8,740 points.
Historical pattern or market reality? The average figure doesn’t accurately reflect a typical August.
An average value is only truly meaningful when the numbers surrounding it show a certain degree of similarity.
Imagine a room with five people. Four of them earn €30,000 a year, and one earns €1 million a year. The average income in that room suddenly jumps to a level far higher than the actual amount that the vast majority of people take home.
Stock market returns in August faced a similar challenge. Several extreme crashes dragged the long-term average down significantly.
That’s why the median is so incredibly useful. The median is simply the value in the middle when ranking the performance of all Augusts from worst to best – providing a more accurate picture of a typical August.
For the EURO STOXX 50 index, the average return for August was -0.19%, a very different picture from the average of -1.42%. Typically, August sees almost no volatility.
Most historical losses stem from five exceptional and unexpected periods of volatility: August 1998: The Euro STOXX plummeted 14.44% as Russia defaulted on its domestic debt and devalued the ruble. August 1990: The index fell 13.82% after Iraq invaded Kuwait. August 2011: A 13.79% drop as the eurozone debt crisis erupted, engulfing Italy and Spain . August 1997: The index evaporated 9.99% due to the widespread Asian financial crisis. August 2015: A 9.19% drop when China unexpectedly devalued the yuan.
These weren’t typical technical corrections. They were global geopolitical and economic shocks that happened to fall in August.
If we remove these five years of anomalous volatility, the average August return of the EURO STOXX 50 would immediately reverse from -1.42% to +0.17%. Just five years out of a total of 39 years have transformed what would otherwise be a very weak month into a month of positive growth.
Why can August amplify shocks? The reason may not lie in August itself, but in how the market operates during the summer holidays.
Europe will essentially be on summer vacation in August. Trading floors become less crowded, and the number of investors participating in market valuations drops sharply. This in itself doesn’t automatically trigger a sell-off, but it makes the market much more sensitive and vulnerable once a downturn occurs.
At this time, very few monetary policy decisions have been made. The European Central Bank (ECB) last meeting was in July, and the next one isn’t until September.
The US Federal Reserve (Fed) also experienced a similar summer meeting gap, leaving the market without major macroeconomic policy events to shape expectations – precisely at a time when liquidity was at its lowest. Then came the Jackson Hole conference. The Fed’s annual symposium in Wyoming at the end of August could become a key market event, especially as investors eagerly awaited signals on interest rate direction.
This year’s conference carries a special significance: This is Kevin Warsh’s first speech as Fed Chairman at Jackson Hole.
Therefore, August is a convergence of three volatile factors: thin liquidity, few scheduled policy events, and the possibility of policy reversal signals from central banks towards the end of the month.
What will make a difference in August 2026? Historical patterns are only truly useful if investors understand what has changed.
European stock markets entered August 2026 at record highs, firmly supported by expectations of soaring corporate earnings. Analysts raised their second-quarter earnings growth forecasts for the entire STOXX 600 index to nearly 21% (compared to 12.5% in May) – giving the market a much stronger macroeconomic foundation than the historical average.
However, the balance sheet still has a dark side. The energy shock in the Middle East remains a constant threat to Europe: escalating energy prices could trigger a resurgence of inflation, while simultaneously eroding corporate profit margins and consumer purchasing power.
Eurozone inflation cooled to 2.8% in June (from 3.2% in May), but a new energy price shock could complicate the path to bringing inflation back to the ECB’s 2% target.
Historical data doesn’t necessarily mean European stocks are bound to plummet this month. In fact, both the EURO STOXX 50 and the DAX closed August in positive territory in almost half the years.
What history is really warning about is more subtle: August isn’t necessarily Europe’s “seasonal collapse month.” It’s a period when rare shocks tend to cause unusually large-scale damage.
Investors don’t need to predict whether August will end higher or lower. A more useful question is whether the market, having just reached record highs, is adequately prepared for a sudden shock amid low liquidity.
That’s what the August Rule is really warning about – not a sentimental scheduling effect, but a critical liquidity vulnerability for the market.
Source: https://baotintuc.vn/thi-truong-tien-te/thi-truong-chung-khoan-chau-au-thuong-lao-doc-vao-thang-8-kich-ban-co-lap-lai-20260813062606442.htm