Don't miss these key summer investing events

A new prime minister and a packed summer of events featuring updates by Lloyds Banking Group (LSE:LLOY), GSK (LSE:GSK), Space Exploration Technologies Corp Class A (NASDAQ:SPCX) and Rolls-Royce Holdings (LSE:RR.) means no chance of a seasonal lull for retail investors.

Developments in the Iran war and the outlook for interest rates on both sides of the Atlantic will also shape the direction of the FTSE 100 index in the weeks and months ahead.

Long gone are the days when stockbrokers would leave the City of London to attend sporting events or decamp to beaches and the countryside, only to return in mid-September.

• Invest with ii: Top UK Shares | Share Tips & Ideas | Open a Trading Account

Nowadays information is available to everyone 24/7 and, while trading volumes do decrease, markets remain active and sometimes volatile.

That’s likely to be the case this summer, particularly in relation to sterling and UK bond yields as traders evaluate their response to Andy Burnham’s first policies as prime minister.

National Grid (LSE:NG.) and other utilities face a bout of uncertainty given the threat of greater state control, while banks such as NatWest Group (LSE:NWG) are at risk of potential tax rises.

There’s also a packed diary of potentially share price-moving company results in the UK and US, alongside longer-term strategic updates by Lloyds Banking Group and GSK.

Don’t miss out on the best days of summer

The old adage of ‘sell in May and go away, don’t come back till St Leger’s Day’ still gets plenty of coverage, despite repeated evidence that such a strategy can be a costly one.

Barclays calculated this year that £100 invested in the FTSE All-Share index in 1986 would be worth £3,392 today if you had made no other trades.

However, if you had carried out the same investment but sold up every May and reinvested in the same index every 15 September, you would have £1,997 - that’s 40% less without even taking into account the trading or platform fees.

• DIY Investor Diary: shifting from 25 holdings to 50
• How to smoothly transition your investment portfolio into retirement

The summer months can be fruitful for investors, especially for those in the US as July historically delivers the best return for the S&P 500 index. The month has produced average growth of 1.7% in Bloomberg figures going back to 1928, with August a mid-ranking return of 0.7%.

The August performance has been more mixed for the FTSE All-Share index, which has risen on 13 occasions in the month but also fallen 13 times since 1999.

Last August was a positive one for many UK investors, given that the FTSE 100 index posted record high closes on 6 August, 14 August and again on 20 August after a rise of 1%.

However, gains in the month were stronger elsewhere as strong corporate earnings and the promise of lower interest rates helped global developed markets to post a 2.6% gain.

How do trading volumes compare?

Volumes are typically lighter in August, although last year’s daily average for the London Stock Exchange electronic order book of 560,312 was not too far below October’s 632,512 and November’s 646,000. The December figure was 545,000.

The daily average peaked at 960,197 in March this year, when the first month of the Middle East war led to heightened volatility.

The FTSE 100’s most traded stock - Lloyds Banking Group - has an average daily trading volume of about 170 million shares, which last August included a one-day low of 52.5 million. But the figure peaked at 466 million on Monday 4 August, when dealings spiked due to the previous Friday’s favourable Supreme Court ruling on motor finance claims.

Lloyds has only had five busier sessions since then, highlighting the potential for market-moving events to occur during the supposedly quieter summer months.

Beware summer storms

The Cboe Volatility Index, better known as Wall Street’s Vix fear gauge, typically rises in August following a calmer period over June and July.

That’s partly due to September’s record as the worst month of the year for the S&P 500 index, prompting traders to review portfolios before dealing volumes ramp up in the autumn.

August 2007 was particularly torrid as fears over exposure to US sub-prime mortgages led to paralysis in credit markets and prompted the European Central Bank (ECB) and US Federal Reserve to inject emergency support. The run on UK lender Northern Rock happened the following month.

In one session during that August, the FTSE 100 slumped 4.1% in its worst showing since March 2003. The start of August 2024 also saw significant volatility as US recession fears on the back of poor jobs data left the S&P 500 as much as 8.5% below its mid-July all-time high.

• Valuable lessons learned from my 2026 share tip performance
• Six stocks that could double their dividend quickly

The Vix fear index surged to pandemic-era levels, while Tokyo’s Nikkei 225 suffered a one-day 12% slump as traders unwound positions where they had borrowed in the yen as a low-yielding currency to invest in higher-yielding currencies.

The global turmoil was brief as a dovish pivot from central banks including the Federal Reserve along with stronger US data and fresh China stimulus led to a significant recovery.

The FTSE All-Share finished the month broadly flat and by the end of the third quarter the S&P 500 index had posted its strongest year-to-date performance of the 21st century.

A good time for stock picking

Trading volumes on the London Stock Exchange are supported by a flurry of half-year results, including the heavyweight sectors of banking, energy, insurance and pharmaceuticals.

This year, the week beginning 27 July is set to see more than a fifth of companies in the FTSE 100 index report their figures before a steady stream of results throughout August.

The reaction to the beats and misses on revenue and earnings and focus on forward guidance make this a good time to be a stock picker, particularly as fluctuations in price can last days as City analysts revise their estimates and recommendations to clients.

AI bull market and US earnings

Companies in the S&P 500 index are on track to report earnings growth of more than 20% for the second quarter in a row, with the Magnificent Seven tech stocks set to deliver 31.1% growth.

However, the other 493 companies are not far behind at 22.8%, which financial data firm FactSet said would mark the highest rate reported by this group since the fourth quarter of 2021.

In fact, four of the five top contributors to earnings growth for the S&P 500 in the second quarter are not Mag7 companies: Micron Technology Inc (NASDAQ:MU), Chevron Corp (NYSE:CVX), Exxon Mobil Corp (NYSE:XOM) and Broadcom Inc (NASDAQ:AVGO). The other in the top five is NVIDIA Corp (NASDAQ:NVDA), which reports results on 26 August.

By the fourth quarter, Wall Street expects that the other 493 companies of the S&P 500 index will report higher (year-over-year) earnings growth than the Mag7.

The current earnings season is likely to be dominated by the evolution of the AI growth story, as well as an evaluation on whether recent records for the S&P 500 index are down to strong fundamentals or excessive enthusiasm.

• How the experts would invest a SIPP at every life stage
• Have delayed mega-IPOs intensified pressure on AI funding?

UBS said: “Our view is that the rally has been earned, with robust profit growth providing the foundation for the advance.

“First-quarter S&P 500 earnings growth was the strongest in four years, reflecting still-healthy economic activity, continued AI-related investment, and improving earnings in some more cyclical areas of the market. We expect second-quarter earnings growth to be even higher.”

It said that one of the key questions is whether the beneficiaries of AI adoption can shift from semiconductors and infrastructure toward energy, applications and companies that can translate the technology into productivity gains.

Bank of America highlights three factors to watch: inflation’s impact on consumer spending, the outlook for AI capital expenditure and return on investment and the quality of earnings given the potential for distortions from investment mark-ups or tariff refunds.

The peak of this year’s US earnings season will be the hyperscalers Meta Platforms Inc Class A (NASDAQ:META) and Microsoft Corp (NASDAQ:MSFT) on 29 July before Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) on 30 July.

One of the biggest events of the US reporting season will be on 4 August, when Elon Musk delivers Space Exploration Technologies Corp Class A (NASDAQ:SPCX) results for the first time since its record stock market debut.

The event also serves as one of the milestones for pre-existing shareholders to sell their shares.

Other key dates include Palantir Technologies Inc Ordinary Shares - Class A (NASDAQ:PLTR) after the closing bell on 3 August, Berkshire Hathaway Inc Class B (NYSE:BRK.B) earlier the same day and Walmart Inc (NASDAQ:WMT) before the start of trading on 20 August. Cambridge-based chip designer ARM Holdings  ADR (NASDAQ:ARM) is due to report on 29 July.

Credit: SpaceX voa Flickr.

More takeover action likely

This year’s bid targets have included FTSE 100-listed Segro (LSE:SGRO), Schroders (LSE:SDR), Beazley (LSE:BEZ) and Intertek Group (LSE:ITRK), as well as FTSE 250 stocks Tate & Lyle (LSE:TATE), Senior (LSE:SNR) and Rotork (LSE:ROR) and Gooch & Housego (LSE:GHH) on AIM.

Investors should be on standby for more deals over the rest of July and August, even if the pace of activity by corporate raiders is likely to slow over the holiday period.

Dealmaking last summer included swoops for JTC, Just Group, International Personal Finance and an offer for Empiric Student Property by Unite Group.

Investors should also make a note of Takeover Panel deadlines in relation to ongoing bid situations, such as those in relation to easyJet (LSE:EZJ). Castlelake has a put up or shut up deadline of 3 August while the date for rival bidder Apollo is 7 August.

Keep an eye out for IPO developments

Global IPO markets are tipped to accelerate in the autumn, supported by AI-driven growth as well as improving investor appetite and a growing pipeline of potential new entrants.

Anthropic and OpenAI are among the AI names tipped to follow the lead of SpaceX, which raised a record $86 billion (£63.9 billion) at a $1.8 trillion valuation in June’s initial public offering.

The UK has experienced another poor year for new issues, although figures by EY Parthenon showed a 215% year-on-year increase in proceeds to £577 million based on seven IPOs.

August is a quiet month for new listings, but investors should be aware of speculation in relation to the autumn IPO window.

• The investment trusts holding IPO candidates
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

One potential candidate is the wealth business Utmost which, according to TheTimes, is preparing for a £2.5 billion that could happen as soon as September.

EY-Parthenon added: “For UK issuers, the focus is shifting from ‘if’ to ‘when’.

“Listing windows are becoming more frequent, and well-prepared companies with a clear equity story, strong financial fundamentals and flexibility on timing will be best positioned to act.

“With a robust pipeline in place, the UK market is well placed to benefit from a sustained recovery into 2027.”

Walking an interest rate tightrope

Fears of tighter monetary policy in the US mean that releases in the economic calendar will have the potential to move markets in the next few weeks.

Examples include July’s consumer prices index reading on 12 August and the Federal Reserve’s closely watched measure of underlying inflation on 30 July and 26 August.

The Fed’s next policy meeting concludes on 29 July, but traders are focused on 16 September as the most likely date for a rate hike. That means Kevin Warsh’s first address to the Jackson Hole symposium on 27-29 August is likely to be a source of potential volatility.

Much will depend on events in the Middle East and the path of oil prices, as well as trends in the labour market following the release of non-farm payroll figures on 7 August.

In the UK, the Bank of England’s monetary policy committee is expected to leave its base rate at 3.75% on 30 July. Its quarterly projections on inflation and growth are published the same day before a press conference by Governor Andrew Bailey.

• Top-performing funds and outlook for rest of 2026
• Fund Focus: alternatives to Terry Smith

The City sees no change in policy over the rest of the year, given that the economy has shown resilience in the face of higher energy prices and not displayed second-round effects.

The next tests include the preliminary estimate of second-quarter GDP on 13 August, when City economists are forecasting growth of 0.2%. An unemployment rate of 5.2% is expected on 18 August before the release of inflation figures on 19 August.

Last August, the Bank of England voted 5-4 to cut interest rates by a quarter percentage point to 4%, although policymakers warned that inflation could slow the pace of further cuts.

Andy Burnham’s first month in Downing Street

Uncertainty caused by the threat of greater state control of utilities hangs over stocks including United Utilities Group  Class A (LSE:UU.) and National Grid.

Traders are also braced for a renewed bout of bond market volatility, although Burnham has eased some of these fears through his commitment to the government’s fiscal rules and choice of advisers including the former chair of the Office for Budget Responsibility.

For now, UBS believes his policies are likely to be moderate to establish credibility, especially around the fiscal rules.

It points out that UK equities generate far more earnings outside the UK (around 75-80%) than within it, and that swings in the currency will therefore matter more for UK equities than small changes to domestic growth expectations.

Capital Economics said that markets would probably tolerate a rise in borrowing provided it is not too big - perhaps of up to about £15 billion or 0.5% of GDP - if it is primarily to invest, and it comes alongside a credible commitment to fiscal prudence.

The consultancy added: “A bigger rise in borrowing and a shift away from fiscal restraint risks a sharp rise in bond yields and may mean the government has to back track anyway.”