Stocks are grinding higher, with the S&P 500 (^GSPC) approaching record highs and the Nasdaq Composite (^IXIC) at the highest level in one month. But one Wall Street strategist is warning investors that the "hot vax summer" for stocks "might feel a little cold and rocky."

Callie Cox, senior investment strategist at Ally Invest, explained on Yahoo Finance Live that the summer is a historically weak period for stocks. Volume typically trails off as investors leave the office and hit the roads. 

"[W]e could see lower volume in the stock market. And lower volume typically leads to a wandering market, especially with the environment we're in, where investors are kind of looking around the corner and saying, 'what's next? What's the ominous thing on the outlook?' And they're feeling a little more hesitant about putting their money in stocks," she said.

This doesn't preclude market strength or necessarily mean we'll see weakness this summer. Cox pointed out that since 1990, the S&P 500 has risen an average of 0.9% between Memorial Day and Labor Day. But that compares to an average of 3.6% for the months before Memorial Day and 4.2% for the months after Labor Day.

"Stocks have bucked the trend recently, though, with five straight summers of gains (including the S&P 500’s 16% gains last summer). And the market’s path of least resistance is higher," she said. 

The summer slowdown

Earlier this year, Cox told Yahoo Finance that year two of a new bull market typically sees more muted returns than those of the first year, which tend to be higher.

Despite the general market strength, investors should still exercise caution. In a separate statement to Yahoo Finance, she writes, "In a (relatively) low-volume environment, bad news tends to hit a hit harder, and small shifts in buying or selling could lead to noticeable market swings. Investors are extra skittish these days, too. We can tell the market’s mindset has changed from 'What could go right?' to 'What could go wrong?,' and that’s led to quick selling on surprise headlines."

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It's also possible that under the market's hood, we could see more painful rotation even as the major indices simply wander sideways. "We’ve seen some big sell-offs in certain swaths of the market, though. That could be a stealth correction. If stocks slip, it’s likely that buyers will keep the market afloat. We’ve gone a long time without a significant drop, but there’s just too much interest in stocks at the moment," Cox wrote. 

Investors still looking to play the market this summer should "dig for treasure," said Cox. "Stocks rarely fall across the board, and we’ve seen growth stocks and high-flyers get hit unusually hard recently. View pullbacks as opportunities to get stocks on sale, and be intentional about where you put your money. We like defensive sectors like consumer staples and utilities in a flat market. Growth stocks are starting to look more attractive, especially if the market is overreacting to inflation fears."

And it doesn't hurt to stash some cash as well. "Cash gets a bad rap these days, but it helps investors stay agile in a pullback. In a time when markets move faster than ever, it helps to always keep some cash on hand. We all learned that lesson in the great reversal of 2020," she said.

Cash also provides an opportunity to get long stocks on any pullbacks. 

"[I]n times when volume is lower and liquidity is lower, it is smart to prepare for a pullback and not get lulled into a false sense of security. And remember that pullbacks are opportunities. They can feel scary in the moment, but they can also lead to lower prices, especially if you're looking over a longer time frame," Cox said. "It's a really good chance to jump into those stocks you really believe in, especially if you're willing to give it a few years." 

Join Jared Blikre for a special Yahoo Finance Plus webinar with Keith Bliss this Wednesday June 9 @ 2:00-2:45pm ET. Free registration open to all.

Yahoo Finance Plus webinar with Keith Bliss Wednesday June 9 @ 2:00-2:45pm ET

Jared Blikre is an anchor and reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared

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