There are now only seven trading days left in Q2 and the month of June. The “Summer Time Blues” are the tendency for lackluster U.S. stock returns in the summer months. While the last few summers have bucked the longer-term trend, early summer has been a bit rocky this year as the S&P 500 (SPX) is down a little over 2% thus far in June (through 6/17). Today, we wanted to take a closer look at the historical return tendencies for July.
Historically, July has been one of the stronger summer months – as its median return has been significantly higher than June’s and slightly higher than August’s. July has also had the smallest draw-down of the summer months at 7.9%, while August’s largest draw-down was more than 14.5%. July has also been more consistent than the rest of the summer as the S&P 500 has recorded a gain in July about 65% of the time since 1928, better than July or August.
Source: Nasdaq Dorsey Wright
Over the last decade, the market has been on something of a hot streak in July. Last year, the S&P 500 gained a little over 2% in July as it continued its recovery from the tariff tantrum, bringing the streak of positive Julys to 11, matching its longest previous streak. That streak, which ran from 1948 through 1959, saw the S&P 500 gain just over 4% on average in July. The current streak, which began in 2014, has not been quite as robust as the S&P 500 has gained an average of 3.25% in July.
Source: Nasdaq Dorsey Wright
As to whether the S&P 500 can stretch its current streak to 12 consecutive Julys of positive returns, a strong finish to June that sees the index finish in the green would bode well for a continuation. When the S&P 500 is positive in June, July has been positive almost 60% of the time. When June has been negative, it has been a coin flip – a negative June has been followed by a negative July 50% of the time.
Historically, July has arguably been the best summer month for U.S. stocks as it has a higher median return and has been positive more often than either July or August. Over the last 10+ years, July has been among the most reliably positive months on the calendar as the S&P 500 has notched a gain in each of the last 11 years in July.
The current reading for the PR4050 is: U.S. Equity Core = 98.59% & Money Market = 2.11%. For the PR4050 indicator to trigger and alert us when we should consider moving to cash, U.S. Equity Core must be 40% or below and Money Market must be 50% or above.
Source: Nasdaq Dorsey Wright
Below is the most recent D.A.L.I. (Dynamic Asset Level Investing) Indicator showing International Equities and Domestic Equities in the top two spots, while both maintain a commanding lead over Cash and Fixed Income.
Source: Nasdaq Dorsey Wright
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