Seasonal Analysis: Counter the June Swoon

Incorporating seasonal analysis as part of your investment strategy may be one way to dampen the negative effects of a potential “June Swoon” in the equity markets. This in turn could help identify equity sectors and industries that could possibly outperform the broad index.  We are encouraged by three sectors’ seasonal tendency to outperform the S&P 500 Index during June over the last 20 years—a month when the index has on average been modestly lower for equity investors, generating positive returns 55% of the time. Nonseasonal factors still influence performance and should not be ignored.

The table below highlights sectors’ average over- and under-performance versus the S&P 500 during June since 1997, as well as the top-performing industry groups over the same period:

The healthcare, telecom services and information technology sectors have shown relative strength versus the index in June over the past 20 years, but if you’re looking for a more targeted strategy, the chart also shows the underlying industries driving relative strength at the sector level (i.e., “What to Watch in June”).

Drilling down, the healthcare sector’s seasonal outperformance is represented by strong breadth across multiple industries, while other sectors that have outperformed have seen narrow breadth on average; most of their gains stemmed from just one or two industries.

Although the S&P 500 has tended to post flat-to-modestly negative returns in June, seasonal analysis can help to identify which sectors and industries may fare better, particularly if volatility increases as we have been discussing.  Please stay tuned to the LPL Research blog for continued analysis of S&P 500 seasonal patterns.

 

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

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.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 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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