Summer of love or heartbreak for stocks?

Traders don’t want to get burned like in past scares

Summers have been anything but lazy on Wall Street.

Last June the “Brexit” shock dominated stock markets. The year before, Greece’s debt crisis made waves. And prior to that, investors had spent the summer months stretching back to 2008 sweating over fears of the Federal Reserve scaling back its stimulus program, or a downgrade of America’s credit rating, or early signs the investment banking giant Lehman Brothers was on the brink of collapse.

But the big moves haven’t always been to the downside. The bull market for stocks posted sizable gains in the summers of 2009, 2010, 2012 and 2014, and it charges on.

So what’s the call this summer? Is a swoon in the forecast? Or will investors dance to the beat of rising stock prices and celebrate their own version of the “Summer of Love,” 50 years after the hippie-led social phenomenon shook the country’s buttoned-down culture?

Just like “the mercury in the thermometer this summer, the stock market will have inevitable ups and downs,” said Mark Hamrick, senior economic analyst at Bankrate.com.

But rather than the market experiencing big price swings, the most likely outcome through August is a continuation of the calm that’s been in place for months — what Nick Sargen, senior investment adviser at Fort Washington Investment Advisors, calls “a summer lull.”

Past summer flare-ups in the period from Memorial Day to Labor Day — such as the 7.5 percent swoon in 2008 when investors first sensed trouble at Lehman months before its bankruptcy, or the 10 percent drop in 2011 when U.S. budget woes were laid bare, or the 12 percent drop in 2015 when Greece was running out of money and a bailout was uncertain — all had one thing in common: They posed legitimate threats to the U.S. economy and its financial stability.

Barring some kind of unexpected shock, Sargen doesn’t see that the type of threat this summer. Investors, however, are monitoring possible sources of trouble, such as North Korea’s nuclear missile threat and political turmoil engulfing President Donald Trump and his administration, he said.

Investors have looked past these concerns because economic conditions are improving around the world. And that optimism is expected to bolster stocks.

There is “little reason to be concerned about a recession here or abroad,” Sargen said, adding that second-quarter U.S. growth is expected to bounce back after a weak start to the year, and corporate profits should continue to come in strong.

Sargen doesn’t see Wall Street getting spooked by a likely interest rate hike from the Fed, either. Nor does he expect German Chancellor Angela Merkel’s fall re-election bid to get derailed in the summer months, a development that would shake markets.

Still, the market isn’t void of risk. It could turn turbulent and stocks could swoon, Sargen said, if there’s “no sign of progress” in getting Trump’s tax cut plan passed or if the president’s political troubles “bring back gridlock” in Washington.