Volume on the Toronto Stock Exchange has been uneven, and New York Stock Exchange trading has been thinning out since last month. If there's another serious increase in rates, people may well choose to bail out again before they go on holidays. Dutch-based researchers Sven Bouman and Ben Jacobsen say holidays are the reason for the poor performance of stock markets in the summer. The seasonal selloff is especially strong in Europe, with its legendary long summer breaks, Mr. Bouman and Mr. Jacobsen found. Whereas in the United States, vacations tend to be short and spread out over the year, many Europeans tend to take their vacation in the summer.
Individuals trade more in the summer.
The cycle starts in January, he explains, when the compensation slate of money managers is wiped clean, and they are suddenly free to take risks. So they might dump big-capitalization stocks they bought late in the previous year and replace them with small caps. Unfortunately for the small investors, they tend to buy into a downward trend, he said. This often leads to the other phenomenon known as the Santa Claus rally. That's because managers dump those relatively unpredictable stocks at the end of the year so they can fill their year-end portfolios with stable companies such as pipelines and utilities, Prof. Athanassakos said.