Second Quarter Review and Third Quarter Preview

Monthly Review/Preview

  • The S&P 500 gained 0.1% for the month, just squeaking out the fourth straight monthly gain for the first time in two years. Considering it was down 4.6% with three days to go, closing green for the month is very impressive. The only other month to be down more than 4% with three days to go and close green was September 1938.
  • The realization that rates will stay lower for longer helped anything that sported a higher yield, as real estate, utilities, and telecom all led in June (per S&P 500 GICS sector indexes). Financials were the big loser, down more than 3%. Tech and consumer staples were the only other sectors lower.
  • The month ended with a blast of volatility, as the S&P 500 dropped 5.3% the two days after Brexit for the worst two day drop in 10 months. Only to rebound the next three days by more than 4.9% for the best three day rally since the February lows.
  • July is the best month during the historically weak summer months. In fact, going back to 1928, the S&P 500 in July has gained 1.52% on average, the most out of any month.

Quarterly Review/Preview

  • The S&P 500 gained 1.9% to close higher for the third straight quarter. This comes on the heels of being down two in a row in the second and third quarters of 2015.
  • Energy and telecom led, while consumer discretionary and technology were the only two groups lower.
  • The third quarter is the weakest quarter of the year going back to 1950, with an average return of 0.5% and higher 59.1% of the time. In fact, during the past 20 years, the third quarter is the only quarter to sport a negative return—down 1.2% on average.
  • Last year, the third quarter lost 6.9%, the worst third quarter since 2011 dropped 14.3%.

Fun Stats

  • The S&P 500 went 20 consecutive days without a 1% move (up or down) right before the Brexit vote. This was the longest streak without a 1% move since late 2014 and it ended with a big gain the day before the Brexit vote
  • The S&P 500 went 54 days without a 1% drop, the longest streak since 66 days in the summer of 2014.
  • The streak above ended once the S&P 500 dropped 3.6% on the day after the Brexit vote. This was the first 3% move in 210 trading days, which was the longest streak in nearly four years.
  • To end the month, the S&P 500 moved 1.3% or more (up or down) six straight days. It hasn’t done seven straight since December 2008.

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

Stock investing involves risk including loss of principal.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

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