August's Dark Reputation Revisited: Europe Defies Seasonal Downturn

European stocks have started August 2026 on a strong note, defying their historical reputation for being one of the weakest months. The EURO STOXX 50 and DAX are hovering near record highs, while the CAC 40 remains close to its peak.

This month has averaged losses in the past, but data shows that these extreme events have skewed the average return. Removing just five extraordinary episodes from the EURO STOXX 50's history flips the average August return from -1.42% to +0.17%.

These rare shocks include Russia's default on domestic debt and devaluation of the rouble in August 1998, Iraq's invasion of Kuwait in August 1990, and China's yuan devaluation in August 2015. These events are not typical market corrections but rather global shocks that have landed in August.

Experts suggest that Europe's summer months can amplify a shock due to thinner liquidity, fewer scheduled monetary-policy decisions, and the possibility of significant central bank signals arriving late in the month. This year's Jackson Hole gathering carries extra weight as it is Kevin Warsh's first address as Fed chair.