The S&P 500 has rallied 3% in July, with the Nasdaq up 3.6% since April 9, bringing total returns to 28% and 38%. However, analyst Jeffrey Hirsch warns that August may not be kind to stocks historically due to frothy sentiment and stretched valuations. Stocks have a tendency to perform well in some months and poorly in others, according to the Stock Market Almanac.

August historically sees negative returns for major indexes, ranking as the 11th or 12th worst month of the year. The lackluster performance in August may be attributed to tougher seasonal tailwinds and historical probabilities. The S&P 500’s valuation is at 22.4 times forward earnings, similar to before the tariff-driven sell-off in February.

Trade deals with global partners like the EU will play a significant role in determining the market’s direction. President Trump extended the pause on reciprocal tariffs until August 1, but if they fall short of expectations, it could impact the market rally. The Federal Reserve is expected to cut interest rates in September, but economic data may dictate the timing.

Investors should consider potential market volatility in August and adjust their portfolios accordingly. While long-term investment plans may not be impacted, active traders may want to take profits to have cash on hand for buying opportunities. Stocks may experience zigs and zags, so being prepared for market fluctuations is essential.

Read more at Yahoo Finance: Analyst sounds alarm on S&P 500 for August