July is a month that usually doesn’t have a lot of news and many market participants are on vacation, but stocks tend to do well. “Wall Street might hit the beach, but stocks are going to work. In fact, over the past 10 years, only March has a better average return for the S&P 500 Index than July does,” explained LPL Research Senior Market Strategist Ryan Detrick.
As our LPL Chart of the Day shows, on various time frames, the S&P 500 did quite well in July, as this month is known for a summer bounce.
One constant each July is that second quarter earnings season kicks off. In a month without a lot of volume historically, earnings seem to have moved stocks higher in July. After S&P 500 earnings gained nearly 25% year over year in the first quarter, earnings, according to Factset, are expected to be up nearly 20% in the second quarter. Now the big wildcard with earnings is going to be how companies do factoring in the stronger U.S. dollar and any negatives regarding trade policy commentary. The good news is that all 11 sectors, via Factset, are expected to produce growth, with energy (141%), materials (33%), tech (25.5%), and financials (22%) leading the way.
Other big events in the month include: monthly jobs data, inflation data, and the second quarter gross domestic product (GDP). The Atlanta Fed GDPNow forecast for growth is currently at 4.1% in the second quarter. Although there isn’t a set date, trade concerns are always lurking and could create some waves in July, but we continue to think that the benefits of fiscal policy outweigh the negatives of tariffs.
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