Tags: Trading | volume | low | August

CNNMoney: Trading Volumes At 5-Year Lows, But Don't Worry

By    |   Wednesday, 22 August 2012 10:34 AM

August is always a quiet month for the stock market as it is a preferred vacation season. But, this year the markets are more quiet and desolate than usual.

With a daily trading volume average on the New York Stock Exchange of fewer than 3.3 billion so far this month, trading volume hasn't been this low since September 2007, says CNNMoney.

Relative to the average August trading volume during the past five years, trading volume is down 30 percent, according to CNNMoney.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

The irony is that these low participation rates come at time when stocks are surging.

The Dow Jones Industrial Average and the Standard & Poor’s 500 Index are both on verge of multi-year highs, according to Dow Jones Newswires.

CNNMoney says this raises concerns that the recent moves higher lack sustenance, and it's just a matter of time before the markets fall.

But many market veterans insist that there is little reason to be worried because there are a host of explanations for the low volumes.

To begin with, it is widely accepted that the financial crisis resulted in a loss of confidence that caused many investors to move to the sidelines and discouraged other individuals from entering the game. This fear and distrust are aggravated by news such as, the flash crash in 2010, the Facebook initial public offering debacle and the multi-billion dollar trading loss at JPMorgan Chase.

Some note that the trend of exchange-traded fund investment also takes a big bite out of volumes. As does the soaring price tag on of some of the popular stocks such as Apple, which limits how many shares investors can afford.

Then too, high frequency trading has also reportedly moderated since its peak in 2009, resulting in lower daily volumes.

Whatever the reasons to which they subscribe, most market veterans are expecting volumes to pick up in September as they normally do. But they warn it's unrealistic to expect pre-financial crisis trading volumes for quite some time.

“People say we're on the track for a new normal, but, after a four-year volume bubble, that's the old normal. This is the marketplace we have to contend with and it's not a function of anything being broken” David Schiff, deputy head of institutional equities trading at JP Morgan Asset Management, told Dow Jones Newswires.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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Wednesday, 22 August 2012 10:34 AM
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