As the S&P 500 trades near record highs amid artificial intelligence euphoria, economist Owen Lamont’s warnings about thin summer liquidity and extreme market dispersion are coming into focus as investors enter Wall Street’s traditional “panic season.”
The Arrival of ‘Panic Season’
For most, August means vacations, but for financial markets, it marks what Acadian Asset Management portfolio manager Lamont called the “panic season” in his July 2025 newsletter. Lamont had noted that historic financial crises, including the 1929 and 1987 crashes, disproportionately cluster between August and October.
One potential culprit is the summer vacation. With traders away, liquidity thins. “Because equity markets were illiquid due to the absence of vacationing traders,” trades generate massive price impacts, Lamont explains, warning investors to “be mentally prepared for an epic financial disaster.”
A Century-Old Market Distortion
This late-summer risk is now colliding with a top-heavy stock market. Jim Bianco of Bianco Research had warned in June 2026 that the market is facing a “historic concentration” not witnessed since the railroad era of the late 19th century.
According to Bianco’s data, while the S&P 500 posts year-to-date gains, stripping away AI-related companies leaves the remaining 500 index stocks up “just 1.04%.” AI-related companies have become increasingly important drivers of index performance, with the top 10 companies accounting for roughly 40% of the entire index.
Valuations Enter a ‘Season of Chaos’
The macro environment is equally stretched. The U.S. total market cap-to-GDP ratio has surged to a record 238%, according to LongTermTrends data, well above its dot-com-era peak. Goldman Sachs recently cautioned that market breadth is at its narrowest level in a decade.
With enormous single-day swings already rocking the technology sector, Lamont has observed that “the beast of volatility has awakened.” If the AI behemoths propping up the S&P 500 stumble while summer trading desks sit empty, the resulting self-fulfilling unwind could be devastating. As Lamont cautions, “the chamber of dispersion has been opened,” and a “season of chaos” is at hand.
How Has the Market Performed in 2026?
The S&P 500 index has advanced 12.44% YTD. Similarly, the Nasdaq Composite index was up 13.63%, and the Dow Jones gained 10.70% YTD.
On Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed lower. The SPY was down 0.23% to $769.35, while the QQQ declined by 0.65% to $716.43. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.03% lower at $535.06.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
Login to comment