Usually around this time of year the City of London tends to get quiet. The queues at the sandwich bars are shorter than normal, you might get a seat on the tube home at 6pm and you may decide to take things down a notch at work if your boss is away. Basically this is the second best time of year to wake up late and leave early, behind only Christmas.
While the workforce is getting lethargic in the late summer sun, what about the financial markets? Traditionally the summer lull has caused range-trading markets that are characterised by low levels of volatility. Positioning tends to be light, there’s not much movement across asset classes and generally things are quiet.
However, then came the start of the financial crisis in August 2007. On 9 August 2007 French bank BNP Paribas stopped investors in a couple of their hedge funds from withdrawing their money. This spooked the markets and ruined the summer holidays of fund managers, traders and analysts alike.
That event goes down in history as the time when the market, and the world’s media, woke up to the subprime debt crisis that started in the US then morphed into the global financial crisis and ultimately into the euro zone sovereign debt crisis.
Since then there has been a further series of events that have scuppered summer plans:
- The dramatic decline of Lehman Brothers throughout the summer of 2008.
- QE from the Federal Reserve since 2009.
- Greece’s demise in 2010.
These event risks brought huge volatility to financial markets and with that volatility came profit opportunities. Since then financial market professionals have tuned out in the summer months at their peril.
But it’s not only the financial crisis and ensuing catastrophes that have eroded the holiday culture in financial centres and ended the concept of summertime markets. The onset of the financial crisis coincided with the explosion in social media and 24-hour news, which means that people who trade financial markets based on news events, such as many FX traders, can trade 24/7 and often don’t let their smart phone or laptop out of their site.
The advances in technology – iPhones, slim line laptops, tablets and iPads – means that these devices are easy to pack in your suitcase and on holiday it’s easy to get the latest market-moving news, access to your trading platform and your data provider, allowing you to trade the markets as readily as you can order a pina colada. Added to this, over the five years since Lehman Brothers collapsed, internet access and broadband services have dramatically improved, which means that you can now log on from virtually anywhere in the world.
Back in September 2011, on a trip to California, I was able to write a post for FOREX.com clients from Yosemite’s Camp Curry! Then while recently booking a future African safari trip I was not surprised to learn that – yep, you guessed it – our safari camp in the middle of the Sabi Sands has perfect internet access.
So what will be the summertime event in 2013?
With the sovereign debt crisis seeming to have calmed down and the beleaguered Western economies finally looking like they are turning a corner, it appears that catastrophic events may be off the menu this summer. However, that doesn’t mean there isn’t plenty to trade on.
Mergers are popping up all over the place, companies are issuing debt at record levels, the US stock markets are at fresh record highs, the UK has a new central bank governor who may shake up monetary policy and introduce forward guidance, there is a feverish debate going on about who will be the next governor of the Federal Reserve and markets continue to steel themselves for a Fed announcement of a tapering of their asset purchases in September.
All of these offer the potential for profit opportunities. So, while people may still go on holiday, they won’t make the mistake of forgetting their laptop chargers or dropping their BlackBerry in the pool. Checking the markets a few times during the day in between turns on the sun lounger has become the new normal in thousands of holiday resorts around the world.