Stock market fireworks

06/28/19
  • July a historically weak month for stocks—until the past decade
  • Stocks often slumped the day after the July 4th holiday

Monday kicks off July, and it will also be a shortened trading week because of the Fourth of July holiday on Thursday—time to check the stock-market seasonal calendar.

July is currently on its longest winning streak as a month since 1960, with the S&P 500 (SPX) landing in the plus column the past four Julys, and eight of the past 10. But this recent bullish trend flies in the face of the month’s longer-term history. Prior to 2015, the longest streak of up Julys was three (1978-80), while the month has had separate losing streaks of four, five, and six years. In fact, before 2009 the SPX gained ground in only 43% of Julys since 1960.

Overall, the SPX’s past 59 July returns have been split evenly between winners and losers:

S&P 500 (SPX) July returns, 1960–2018. SPX up 8 of last 10 Julys.

Source: Power E*TRADE


And what about patterns surrounding Independence Day? The SPX’s behavior in the days before and after July 4 shows a tendency toward:

1. Bullishness in the three days before the holiday (i.e., Monday–Wednesday next week), especially the day before the holiday, which has closed up in 36 of the past 59 years.

2. Net bullishness in the five days following the holidayexcept for the first day after it, which has closed down in 33 of the past 59 years. Notice that this July 4 falls on a Thursday? The tendency for people to take Friday off to get in a four-day weekend may result in lower market participation that day, which could possibly feed the historical pattern of a weak trading day.

S&P 500 (SPX) daily returns before/after July 4th, 1960–2018. July 5th blues

Source: Power E*TRADE


The chart above shows the SPX’s median returns (1960–2018) for the three days before the Fourth of July holiday and the five days after it.

Despite its tendency toward being a down day, the day after the holiday closed higher in 2017 and 2018. Since 1960, though, there’s only been one three-year winning streak for this day (1966–1968).

Something to keep in mind when you take a break from reading about tariffs.

Today’s numbers (all times ET): Personal Income and Outlays (8:30 a.m.), Consumer Sentiment (8:30 a.m.), Baker-Hughes oil rig count (8:30 a.m.).

Today’s earnings include: Constellation Brands (STZ), JinkoSolar Holding (JKS), Carnival (CCL).

 

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