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The Great Coffee Economy Con – Resilience

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Coffee, the addictive obsession of the affluent class, can tell us more about modern society than just retail trends; it is an indicator for how the modern neoliberal system operates, and its current shift toward new economic extremes.

As an ‘indulgence’ (which today has the opposite sense1 to its original meaning), coffee is a great indicator of food culture. If we pick the economics of that apart we can see how the debate about coffee, and who benefits from it, doesn’t reflect its exploitative economics2; and so perpetuates those trends.

With the current rail strikes – and before that, lockdown – the media have developed a habit of interviewing coffee shop proprietors to ask their views. Presumably because, for alleged ‘balance’, it’s a great way of securing a negative response to the industrial action that the Government’s agenda demands. But are the views of coffee shop owners truly representative?

I love coffee, but I can’t afford High Street coffee any more. In contrast, the media’s obsession with coffee, and its cost, has become emblematic of the affluent middle class lifestyle of the media itself – akin to its origins in the3 coffee shop culture of 370 years ago4 in the Seventeenth Century.

In this post I’m going to update some work5 I did pre-pandemic, to look at how the modern obsession with coffee reflects the deeper dominant ideology6 of our times.

In my home town, Banbury, coffee is in your blood – whether you drink it or not. Since the 1960s it has been home7 to the largest instant coffee plant8 in Europe. They roast coffee beans, make coffee, then spray-dry it to create instant coffee. The town often drips with the smell of coffee, and the river ran brown with its effluent.

coffee video

Ramblinactivist video 2022/23. ‘The Great Coffee Economy Con’, Lammas 2022 (click for YouTube video)

All that changed in the 1990s. The economics of coffee retailing shifted, and as a result, people developed a taste – or should that be, ‘habit’9 – for ‘fresh’ coffee. New coffee shops sprang-up, with industrial coffee machines that could pump-out exotic coffees on demand. ‘Choice’ became the cult selling point, a ‘narcissism of small differences’10, to the point where ordering a round of coffees became a memory test challenge.

The modern cult of coffee, and its place in an increasingly unequal, polarised world, and its use within food culture as a measure of acceptable affluence, needs to be exposed!

Food banks versus coffee shops

I know it’s fashionable to use11 the metric of McDonald’s stores (1,300) versus food banks12 (>2,500). Why not compare to the number of Greggs13 (~2,200), given those shops are more ubiquitous in High Streets and shopping centres?

In practise, both Greggs and McDonald’s sell basic, low cost, hence low quality food that is affordable to most people. From the perspective of food inequality, coffee shops are a critical choice because they sell a culturally refined, artificially inflated product, outside the price-range of many people – again, highlighting the media’s myopia over the growing ‘underclass’ divide in society.

In 2021, in terms of the expensive branded coffee chains, there were over 9,500 outlets14 – almost four times more than the number of food banks. Collectively the major chains turned over £4.4 billion in 2021, recovering most of their pandemic losses. Even though, as a result of various factors, the prices for coffee15 are now in the range of £3 to £4.

ONS data shows16 in 2021 the richest 10% spent twice as much on food and non-alcoholic drinks as the poorest 10% – reflecting the higher price paid not simply the volume consumed.

“Follow the money”

The popular debate over the price of a cup of coffee has become an exercise in virtue signalling23; it has little to do with the politics and economics at the root of the issue.

Britain has some of the most concentrated, long-term land ownership27 in the world. Much of it is rural, but a significant concentration exists within certain urban land-uses – predominately housing and retail property.

Early economists were pretty scathing of “rent seeking” activity28 in the economy. It levies a charge on the economy to use assets, while often doing little to create new economic value in return for that ‘unearned’ wealth.

The price of a cup of coffee shows how neoliberal economics dominate society, and how that economic debate steers towards certain consumer issues, and away from the structural inequality it creates within national economies.

At the global level29 economics has become – through institutions like the World Bank, IMF and WTO – a new form of colonialism30 based around the monopoly control of key commodities; like oil, wheat, or coffee. Instead of a ‘physical’ colonialism, imposed by a particular nation, it is an ideological form of colonialism, where a set of ideas and values dominate through an economic lobby irrespective of nationality or state.

If we look at the corporate structures surrounding expensive coffee shops, they reflect the deepest values of neoliberalism31: Of unfair trade practices, both nationally and globally; authoritarian practices in the operation of those businesses – such as off-shoring or their opposition to unionisation32; and by extension, pushing those values out into the wider world through unfair contracting, franchising, and political lobbying practices.

Figures from the British Property Federation33 (for 2017) show that just over half of commercial property in Britain is owned by investment companies; and of that £486 billion of investment property almost a third, £183 billion, is owned by off-shore investment companies.

The results of a 2019 survey34 (adapted for 2022 prices) of a £3.50 High Street cup of coffee – and where those costs may go

coffee survey

That means it’s not just the profits from selling the coffee34 itself that are spirited away35, off-shore, by some of the36 leading coffee chains. The profits from the property they operate within are just as likely to be sent off-shore, untaxed, through the operation of physical- or intellectual property-holding companies37 in tax havens. And while the media have occasionally mention the 35p (10%) that may be going off-shore from the coffee chain, they do not mention the up to £1 or more (35%) that might be off-shored by the retail property owner (see chart).

How can you expect to defeat these practices when those same principles38 are at work in our daily life? The price of that cup of coffee is emblematic because it ‘normalises’ practices such as exploitative franchising contracts, the zero hours employment culture, the oligopoly of corporations who control of retail property, and the exploitative international commodity trading system.

Expensive coffee from coffee chains internalises the core values of neoliberalism: Through the direct exploitation of workers in the supply chain; more widely, through the social effects39 of their low-pay/tax-avoiding business, creating poverty across the nation; and the political culture normalised by these practices.

The economics of ‘Own Made’ coffee

The simple alternative to ‘shop bought’ coffee is to ‘do-it-yourself’. This creates a problem: Coffee doesn’t grow on trees – not in temperate climates!

It’s really difficult to buy raw (yellow/green) beans and roast them yourself42. That market is almost exclusively a commercial one. The few providers offering raw beans tend to charge a premium, as it’s a niche market aimed at coffee obsessives. And the mechanics of trying to import your own beans, direct from growers, tangles you in the stark reality of how ‘unfair’ trade really is, because it is skewed towards the needs of the bulk commodity system. E.g., it‘d only really be ‘economic’ to import a 20-tonne container-full.

For those who like their drugs to be ‘ethical’43, that usually adds around 20% to the cost of beans or ready-ground bags. Even then, there are issues over how fair ‘fair trade’ is, as the processing and packaging plant is usually not based in the country of origin; meaning that most of the ‘surplus value’44 doesn’t flow to the producing nation.

Buying ready-roasted whole beans saves a small amount – usually no more than 15% to 25%. Again, though, often there is no saving as it’s a market directed towards people with expensive coffee machines, or who obsessively grind their own. It also assumes that you have the ability to easily grind them yourself; though the positive aspect of ‘grind-it-yourself’ is that the beans give more of a flavourful hit, as the volatile oils do not evaporate as easily from beans as they do from the ready-ground coffee.

For the average person, though, buying ready-ground coffee is going to be the simplest option. Here the market has standardised around roughly quarter-pound/227 gram bags. The only practical option for bulk buying is to wait for a special offer in the supermarket, then buy a huge amount in a single purchase – stockpiling the bags until the next special offer comes along (that’s often cheaper than buying on-line).

Even the relatively more expensive ‘bag’ option shows just how much money is extracted from the public via coffee shops when we do the sums:

In summary then, shop-bought coffee is twelve times more expensive than you might reasonably pay for a good ‘DIY’ brew. If you were to buy a stainless-steel Thermos and carry it with you, you’d pay for the flask with the money saved the second time you filled it!

“Just give me the coffee!!”

I know: All you desperately need is coffee so that you can minimally function in this mad mad world. I too can empathise with that! So why am I trying to complicate your caffeine habit with insights into neoliberal economics?

low wages high rent cartoon

‘The Condition of Laboring Man at Pullman’ (1894)

Apart from Tory MPs, it is difficult to think of anyone who thinks food banks are a good idea. Yes, they are objectively ‘good’ compared to allowing 3 million people to starve; but the fact is they shouldn’t need to exist in a country as rich as ours. The reason they do exist is because of the economic dogma that all major political parties worship, and how that has progressively impoverished people across Britain.

If you want to break that then you have to act; and a cost-effective way to exclude the most rapacious business practices which extort money from the public is to boycott the expensive chain coffee shops. This trade is ‘unfair’ not just because of the exploitation of the coffee growers. Both the purchaser and the farmer are being conned by that same neoliberal economic system – and unless you recognise that you won’t change it.

Right now, led by Britain and the US, the right-ward shift in national politics – assisted by the economic disruption wrought by the libertarian billionaires of Silicon Valley – is driving a new wave of extreme neoliberal economics. Some actually label this, ‘neofeudalism’45, due to the level of economic power taken from average person and given to corporations and billionaires.

This new authoritarian neoliberalism is not a departure from the policies of Reagan and Thatcher forty years ago. It is actually more in line with the ‘pure’ neoliberal theory that was first dreamt of by right-wing think-tanks in the Sixties and Seventies. Though its political supporters rhetorically speak of ‘free markets’, instead this new right-wing orthodoxy seeks to reorganise society in a coercive, non-democratic, and unequal way: From cutting red tape to removing protest rights, this is the goal of the political Right.

The true economic divide is not between consumers in the ‘developed world’ and poor farmers in the ‘developing world’. The divide is between those who must work (coffee shop owners included!), and taking ‘unearned’ profits from assets which should be co-operatively owned by society.

Households are central to the resistance to neoliberalism, and to the neoliberal world-view in general. Resistance doesn’t begin with throwing bricks; it begins when you refuse to live as directed by this economic scam. To make a start, just brew your own coffee! After that, everything else is negotiable.

Endnotes:

1. Wikipedia:
‘English Coffeehouses, Penny Universities’.

2. Ethical Consumer:
‘London’s Original and All-Inspiring Coffee House’.

3. Historic UK: ‘The untold story about a cup of High Street coffee’, 2019.

4. Atlas Obscura:
‘Dominant ideology’.

5. Free Range Network:
‘Indulgence’.

6. Wikipedia:
‘Coffee and beans’.

7. Wikipedia:
‘Kraft Foods Banbury’.

8. Wikipedia:
‘Instant coffee’.

9. Wikipedia:
‘Caffeine dependence’.

10. Wikipedia:
‘Narcissism of small differences’.

11. Huff Post UK:
‘Iceland Boss Points Out UK Has More Food Banks Than McDonald’s Branches’, 24th September 2021.

12. Independent Food Aid Network: ‘Mapping the UK’s Independent Food Banks’.

13. Scrape Hero:
‘Number of Greggs locations in the UK in 2022’.

14. World Coffee Portal: ‘UK coffee chains achieve £1.3bn sales rebound as outlets exceed pre-Covid levels’, 20th January 2022.

15. Mirror On-line: ‘Cost of high-street coffee set to rise by 30 per cent due to ‘extreme weather’’, 15th January 2022.

16. Office ofr National Statistics:
‘Family spending workbook 2 – expenditure by income’, 18th July 2022.

17. Trussell Trust: ‘Food banks provide more than 2.1 million food parcels to people across the UK in past year, according to new figures released by the Trussell Trust’, 27th April 2022.

18. Mirror On-line: ‘Food bank charity hands out emergency parcel every 13 seconds as demand soars’, 24th July 2022.

19. Big Issue: ‘Food poverty in the UK – The causes, figures and solutions’, 20th June 2022.

20. FareShare: ‘What we do’.

21. FareShare: ‘Annual Report 2020/21’, December 2021.

22. FareShare:
‘FareShare continues to deliver 4 meals every second to struggling UK families, as cost of living bites’, 27th May 2022.

23. Wikipedia:
‘Virtue signalling’.

24. Fairtrade Foundation:
‘Coffee Farmers’.

25. Journal of Consumer Ethics:
‘From bean to cup and beyond – exploring ethical consumption and coffee shops’, vol.2 no.2 pp.34-47, November 2018.

26. World Economic Forum:
‘From plant to paper cup – The economics of coffee in one chart’, 28th October 2020.

27. Guardian On-line:
‘Half of England is owned by less than 1% of the population’, 17th April 2019.

29. YouTube: ‘Colonialism Never Ended – Neo-Colonialism, Semi-Colonies & Bureaucrat Capitalism’, February 2022.

30. Wikipedia:
‘Neocolonialism’.

31. Globalisations:
‘Framing the neoliberal canon – resisting the market myth via literary enquiry’, vol.16 no.3 pp.245-259, 2019.

32. Wikipedia:
‘Starbucks unions’.

33. British Property Federation:
‘Property Data Report 2017’, October 2017.

34. FT: ‘From bean to cup, what goes into the cost of your coffee?’, 4th June 2019.

35. Guardian On-line:
‘Wealth doesn’t trickle down – it just floods offshore, research reveals’, 21st July 2012.

36. Mail On-line: ‘As small firms are hammered by a tax hike, guess what – the big boys including Starbucks, Gap and Apple are still getting away with murder’, 21st March 2017.

37. YouTube:
‘McDonald’s $3.4 Billion IOU To Itself’, 22nd April 2022.

38. YouTube: ‘My Clothes Tell A Story of Greed’, June 2022.

39. Guardian On-line:
‘It’s not the hungry who gain most from food banks – it’s big business’, 25th March 2019.

40. Critical Social Policy:
‘The growth of food banks in Britain and what they mean for social policy’, vol.39 no.1 pp.3-22, 2019.

41. Journal of Sociology and Social Welfare:
‘Globalization, precarious work, and the food bank’, vol.35 no.2 pp.9-28, June 2008.

42. DIY Natural:
‘Five Ways To Roast Your Own Coffee At Home’, 2018.

43. Fairtrade Foundation:
‘Coffee’.

44. Wikipedia:
‘Surplus value’.

45. Wikipedia:
‘Neo-feudalism’.

© 2022 Paul Mobbs; released under the Creative Commons license.

Teaser photo credit: Author supplied.

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Charting the Global Economy: US Inflation Comes Off the Boil – BNN Bloomberg

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Inflationary pressures in the US simmered down on the heels of cheaper gasoline and other fuel costs, which may help persuade the Federal Reserve to ease up a touch on the monetary policy brakes.

In the UK, the economy shrank in the second quarter for the first time since Covid-19 lockdowns more than a year ago. Singapore reduced its growth forecast for this year after its economy contracted last quarter, while rapid inflation encouraged steep interest-rate hikes by monetary authorities in Mexico and Argentina.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

US

Inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively boosting interest rates. Consumer prices increased 8.5% from a year ago after hitting a more than 40-year high of 9.1% a month earlier.

Ending emergency unemployment benefits had a significant impact on boosting employment, according to a St. Louis Fed working paper that may underline Republican criticism of a 2021 program.

Rental costs are soaring at the fastest pace in more than three decades, surpassing a median of $2,000 a month for the first time ever.

Europe

The UK economy shrank in the second quarter for the first time since the pandemic, driven by a decline in spending by households and on fighting the coronavirus. Gross domestic product fell 0.1% after an 0.8% gain in the first quarter. The Bank of England expects that inflation raging at a 40-year high will tip the economy into a recession later this year.

Spain is opening its doors to foreign workers to fix labor shortages and ease a demographic slump threatening its future prosperity. In contrast with more anti-immigrant politics in much of Europe, the government has loosened rules to allow the recruitment of employees in their countries, mostly in Latin America, for both skilled and unskilled jobs that are hard to fill.

Asia

Singapore trimmed its 2022 growth forecast to reflect an increasingly challenging global environment, after the economy slipped into contraction in the second quarter. Final data for the June quarter Thursday showed gross domestic product shrank 0.2% from the previous three months, and worse than the zero growth estimated by Ministry of Trade and Industry earlier.

A global spell of high inflation, aggressive monetary tightening and the risk of a recession are prompting economists to revise Indonesia’s economic forecasts for the remainder of the year. Analysts raised inflation projections for the third and fourth quarters by almost a full percentage point to 5% and 5.15%, respectively, median forecasts from Bloomberg’s latest monthly survey showed.

Emerging Markets

Argentina’s central bank raised its benchmark Leliq rate to 69.5%, representing the largest hike in almost three years and signaling a more aggressive stance against surging inflation. Mexico’s central bank boosted its key rate to an all-time high of 8.5%.

Brazil consumer prices tumbled by the most on record in July after President Jair Bolsonaro slashed utility taxes to tame the soaring cost of living and lift his re-election chances. 

Kenya’s presidential election took place Tuesday as East Africa’s largest economy grapples with surging living costs and rampant unemployment. Deputy President William Ruto and Raila Odinga, a former prime minister who’s running for president for a fifth time, were the clear front-runners to succeed incumbent leader Uhuru Kenyatta. Final results are expected by Aug. 16.

World

When Group of Seven leaders gathered in the Bavarian Alps in June, they pledged to stand with Ukraine for the long haul. Their Group of 20 counterparts are proving less supportive. Only half have joined the international sanctions imposed on fellow member Russia over its invasion of Ukraine.

Chinese exports to Russia are back near levels seen before the Kremlin’s invasion of Ukraine, propelling a rebound in trade that’s helped cool off a historic rally in the ruble. Russia bought $6.7 billion of goods in July from China, an increase of more than a third from the previous month and up by more than an annual 20%.

Bloomberg interviewed several families — in Nigeria, India, Brazil and the US — various times between June and August last year about the swaps and sacrifices they were making in order to keep food on the table as prices rose. It turns out, chronicling what was then eye-popping food inflation wouldn’t capture the depths of what was to come. 

©2022 Bloomberg L.P.

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Victoria looks to be a national leader in the circular economy – Saanich News

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When athletes stood on the podium during last summer’s Tokyo Olympics, the medals hanging from their necks were made from melted-down metals in six million old cell phones and other discarded electronics.

Others, nowadays, enjoy having their home moderated by insulation made from the excess scraps of denim that don’t get to become jeans.

Those are two examples of the circular economy that researchers say could recover $4.5 trillion worth of otherwise wasted resources by 2030. Keeping materials out of the landfill in the market is something the City of Victoria hopes to capitalize on as it adds a circular lens to its 20-year economic strategy.

Spurred by a motion from Coun. Jeremy Loveday, the city will now add a section to Victoria 3.0 on becoming a national leader in the circular economy.

“Making sure our economic priorities align with our goals regarding climate action and waste reduction, I think this helps us also to be in a better place to capitalize on the economic benefit of the circular economy which is predicted to continue to grow,” Loveday said before council approved the motion this month.

The action will include ensuring there are zoned areas for circular businesses and non-profits to operate within the city. Those will include light industry spaces, which Victoria-based Project Zero says reduces a key barrier for entrepreneurs trying to scale up their up-cycle or repair businesses.

“There isn’t anything right now that’s on that smaller scale or that’s financially accessible,” said Georgia Lavender, who leads Project Zero’s circular economy program.

The non-profit has been running a local entrepreneur incubator for five years, but the term “circular economy” was still new to people a couple of years ago, she said. But Lavender has been inspired lately by all sectors and levels of government seeing the approach as a way to support local innovation, job creation and supply chain resiliency.

“We’ve seen a really big shift toward regions wanting to implement a circular economy model and really seeing the opportunities it holds, not only from an environmental perspective but also an economic development perspective,” she said.

Some of Project Zero’s Victoria start-ups now commercializing include the cup-share service Nulla and BinBreeze, which uses waste wood to improve compost bin productivity and pest deterrence.

Lavender said the innovators are helping to cut emissions while creating jobs, and Vancouver Island as a whole has the opportunity to position itself as a leader in the circular sector. The focus could help the supply chain be more resilient, Lavender said, by using local manufacturing to reuse resources instead of shipping waste off the Island for processing.

The Victoria direction also commits to business space in the coming Arts and Innovation District, the creation of a circular economy hub, exploring partnerships for a zero waste demonstration site and launching an innovation grant.

“Things like that just create more opportunity for these ventures to keep their operations within Victoria and not have to move to other regions,” Lavender said.

READ: Project Zero aims to create circular Vancouver Island economy

READ: CRD aims to be zero waste national leader, reduce enough to curb landfill expansion


Do you have something to add to this story, or something else we should report on? Email:jake.romphf@blackpress.ca. Follow us on Instagram.
Like us on Facebook and follow us on Twitter.

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Soft landing hopes for U.S. economy brighten outlook on stocks – The Globe and Mail

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Optimism is seeping back into the U.S. stock market, as some investors grow more convinced that the economy may avoid a severe downturn even as it copes with high inflation.

The benchmark S&P 500 has rebounded about 15% since mid-June, halving its year-to-date loss, and the tech-heavy Nasdaq Composite is up 20% over that time. Many of the so-called meme stocks that had been pummeled in the first half of the year have come screaming back, while the Cboe Volatility Index, known as Wall Street’s fear gauge, stands near a four-month low.

In the past week, bullish sentiment reached its highest level since March, according to a survey from the American Association of Individual Investors. Earlier this year, that gauge tumbled to its lowest in nearly 30 years, when stocks swooned on worries over how the Federal Reserve’s monetary tightening would hit the economy.

“We have experienced a fair amount of pain, but the perspective in how people are trading has turned violently towards a glass half full versus a glass half empty,” said Mark Hackett, Nationwide’s chief of investment research.

Data over the last two weeks bolstered hopes that the Fed can achieve a soft landing for the economy. While last week’s strong jobs report allayed fears of recession, inflation numbers this week showed the largest month-on-month deceleration of consumer price increases since 1973.

The shift in market mood was reflected in data released by BoFA Global Research on Friday: tech stocks saw their largest inflows in around two months over the past week, while Treasury Inflation-Protected Securities, or TIPS, which are used to hedge against inflation, notched their fifth straight week of outflows.

“If in fact a soft landing is possible, then you’d want to see the kind of data inputs that we have seen thus far,” said Art Hogan, chief market strategist at B. Riley Wealth. “Strong jobs number and declining inflation would both be important inputs into that theory.”

Through Thursday, the S&P 500 was up 1.5% for the week, on track for its fourth straight week of gains.

Until recently, optimism was hard to come by. Equity positioning last month stood in the 12th percentile of its range since January 2010, a July 29 note by Deutsche Bank analysts said, and some market participants have attributed the big jump in stocks to investors rapidly unwinding their bearish bets.

With stock market gyrations dropping to multi-month lows, further support for equities could come from funds that track volatility and turn bullish when market swings subside.

Volatility targeting funds could soak up about $100 billion of equity exposure in the coming months if gyrations remain muted, said Anand Omprakash, head of derivatives quantitative strategy at Elevation Securities.

“Should their allocation increase, this would provide a tailwind for equity prices,” Omprakash said.

Investors next week will be watching retail sales and housing data. Earnings reports are also due from a number of top retailers, including Walmart and Home Depot, that will give fresh insight into the health of the consumer.

Plenty of trepidation remains in markets, with many investors still bruised from the S&P 500′s 20.6% tumble in the first six months of the year.

Fed officials have pushed back on expectations that the central bank will end its rate hikes sooner than anticipated, and economists have warned that inflation could return in coming months.

Some investors have grown alarmed at how quickly risk appetite has rebounded. The Ark Innovation ETF, a prominent casualty of this year’s bear market, has soared around 35% since mid-June, while shares of AMC Entertainment Holdings , one of the original “meme stocks,” have doubled over that time.

“You look across assets right now, and you don’t see a lot of risks priced in anymore to markets,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

Keith Lerner, co-chief investment officer at Truist Advisory Services, believes technical resistance and ballooning stock valuations are likely to make it difficult for the S&P 500 to advance far beyond the 4200-4300 level. The index was recently at 4249 on Friday afternoon.

Seasonality may also play a role. September – when the Fed holds its next monetary policy meeting – has been the worst month for stocks, with the S&P 500 losing an average 1.04% since 1928, Refinitiv data showed.

Wall Streeters taking vacations throughout August could also drain volume and stir volatility, said Hogan, of B. Riley Wealth.

“Lighter liquidity tends to exaggerate or exacerbate moves,” he said.

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