And another factor that may contribute to higher volatility: Investors are increasingly turning a blind eye to the escalating conflict in Ukraine. To the extent the situation there continues to deteriorate, investors are likely to pay more attention, leading to bumpier markets in the process.
To be sure, I still expect stocks to advance in 2014. A strengthening economy, low inflation and moribund yields suggest that equities can, and probably should, move higher by year end. But in the near term, negative seasonality and complacency over growing geopolitical risks suggest that investors exercise a bit of caution as the summer draws to a close.
Sources: BlackRock, Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.