We examine how the S&P 500 has historically fared in July.
There are now only seven trading days left in Q2 and the month of June. A couple of weeks ago, we discussed the “Summer Time Blues” – the tendency for lackluster US equity 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 also has also had the smallest drawdown of the summer months at 7.9%, while August’s largest drawdown 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.
Over the last decade, the market has been on something of a hot streak in July. Last year, the S&P 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 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 has gained an average of 3.25% in July.
As to whether the S&P 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 US 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 has notched a gain in each of the last 11 Julys.
