Investors could see more angst this summer

NEW YORK (Reuters) - Investors already whipsawed by a volatile stock market should expect more of the same this summer, Wall Street strategists say.

Signs of inflation, rising interest rates, unstable commodity prices, a cooling housing market and geopolitical tensions add up to a season of heightened investor angst that could stymie rallies this summer.

Volatility usually wanes from late June through August. In past years, trading volume has in general slowed as many market participants headed for the beach.

But that trend seems to be diminishing with the expansion of electronic trading, which allows for fewer participants to trade the same amount of stocks, and the enormous growth of hedge funds.

A global sell-off in stocks that started in May is not over and may only be just starting, said Abhijit Chakrabortti, global equity strategist at JPMorgan Chase & Co.

"This is nothing compared with what we may see late in the summer and early October -- once slower growth finally sinks in and expectations for higher benchmark rates, at 6 percent or even more, come out," Chakrabortti said at the Reuters Investment Outlook Summit in New York.

Rebecca Patterson, currency strategist at JPMorgan, a participant at the Reuters Investment Outlook Summit, sees some volatility in commodity prices.

"Commodity risk won't go away, especially with hurricane season. We've got a Fed that is going to continue to be data- dependent." There is also more volatility ahead on geopolitical concerns such as the tension in the Mideast, Patterson said.

"You have a lot of pretty major event risks over the next three to four months -- that tells me we are going to keep seeing volatility priced back into markets," she said.

She cautioned this does not mean that equities will continue to swoon but it is also unlikely that the market is completely out of the woods yet.

Tom McManus, chief investment strategist at Banc of America Securities, believes the Federal Reserve is not done with its campaign of increasing interest rates.

There is a good chance to see a tightening of interest rates in June, an August pause, a September tightening, an October pause and a December rise in rates, he said.

"The Fed will be able to skip a meeting or two, but the market will not be able to conclude that the Fed is done," he said.

The upward spike in the Chicago Board Options Exchange Volatility Index .VIX or VIX, which measures the projected volatility in Standard & Poor's 500 index .SPX options, is one sign of investors' mounting anxiety since U.S. stocks ended their rally after May 10 and began their downward march.

On the other hand, with the VIX at a level of 21.5, near its highest in three years, some investors are turning to VIX futures and options betting that most of the damage in the stock market may be over and that volatility may subside over a traditionally slow summer period.