Tags: stocks | July | Dow | summer

July: The Summer Savior for Stocks?

By    |   Tuesday, 01 July 2014 11:40 AM

Historically, stocks spend most of the summer in the red, with one exception: July.

“June, August and September have all averaged declines over the last 20 years, but July is the one summer month where green shows up,” Paul Hickey, co-founder of Bespoke Investment Group, noted in his July seasonality analysis.

Editor’s Note:
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Over the past 20 years, in July, the Dow Jones Industrial Average has posted average gains of 1.1 percent and has moved higher 65 percent of the time, USA Today says Bespoke data show.

July kicks off with a cautious market that's awaiting the June jobs report to provide some indication of what lies ahead for the rest of the year.

Despite stock strategists' optimism during the first half, the market is currently concerned about rising inflation and slower growth, as the Federal Reserve withdraws from its stimulus program and nears rate hikes, notes CNBC.

Investors are still digesting the news of a nearly 3 percent contraction in GDP during the first quarter and economists' downward revisions to their forecasts for the second quarter.

“I think obviously with the GDP number being a lot weaker than everyone was expecting, there's a lingering level of concern that this is the start of a slowdown. The unemployment numbers are going to be more critical than ever,” Drew Matus, deputy chief U.S. economist at UBS, told CNBC.

“I think there will be some level of comfort if we get the kind of [employment] numbers we've been getting,” he added.

Even so, July may not prove to be quite the summer savior that some expect. The bad news, says USA Today, is July has been falling in the monthly performance race in recent decades.

Look at the Dow over the past 100 years and July was the second-best performing month. But check the data for the past 50 years and 20 years and July ranks sixth for performance.

Still, seasonality is on investors' side, says USA Today. At worst, Wall Street is likely to see a dull month ahead, which is better than a severe correction.

BlackRock's chief investment strategist, Russ Koesterich, expects any further gains to be fairly muted.

“I think the stock market is extended, particularly in the U.S. Stocks can grind higher, but you have to realize you're starting at a much higher valuation point than you were two years ago,” he told CNBC. “There's still patches of softness. It's still clear consumption is not booming, but generally the economy is improving. It's a subpar recovery and that hasn't changed,” Koesterich added.

Editor’s Note:
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Historically, stocks spend most of the summer in the red, with one exception: July.
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Tuesday, 01 July 2014 11:40 AM
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