August was a brutal month for investors.
Fears about a slowdown in China’s economy and concerns about when the Federal Reserve will raise interest rates pushed stocks sharply lower this month. While the market recovered much of the ground it lost, the Standard & Poor’s 500 index still finished August down 6.3 percent, its worst showing since May 2012.
The selling started midway through the month after China shocked investors by devaluating its currency. The move, an effort to boost China’s economy, seemed to have the opposite effect. Global investors interpreted the decision as a sign that China’s economy, the second-largest in the world, was growing more slowly than anticipated. That combined with another plunge in Chinese stocks sent off red flags in Asia, Europe and the Americas.
The selling was fierce and deep. Trading volume, which typically slows in summer, spiked. The S&P 500 index at one point fell into what’s known as a “correction,” which is when an index falls 10 percent or more from a recent high.
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