Expect another strong July for stocks, market strategist says

Published Wed, Jun 28 202310:01 AM EDTUpdated Wed, Jun 28 202312:27 PM EDT

The past decade has brought particularly strong months of July for the S & P 500 , according to Carson Group. The firm's chief market strategist expects a similarly good performance this year. In the past 10 years, the S & P 500 gained 3.3% in an average July, making it the best month on average for returns over the same period, Carson data shows . By comparison, when looking all the way back to 1950, July is the fourth-best month with an average return of just 1.1%, according to data analyzed by the Stock Trader's Almanac. Nine of the past 10 Julys have ended positively, compared with a July win rate of about 58% going back to 1950. Part of the performance over the past decade can be attributed to July's strong second-quarter earnings reports when stacked up against Wall Street expectations, an especially prominent trend the past two years, according to Ryan Detrick, Carson's chief market strategist. "There's been a lot of worry, and a lot of fear, about potential recessions," he said. "An earnings season comes in, and you realize, 'Things aren't so bad.' And we think that's one of the potential biggest reasons why, in our view, we've seen such strength the last decade." .SPX 3M mountain The S & P 500 Detrick expects this year's performance for the trading month, which kicks off at Monday's open, to look more like a continuation of the past decade's trend than the longer-term historical average. That is partly because there's already a summer rally taking place, which Detrick said has been driven by investor expectations for an improvement in the broader economy. His positive outlook has also been bolstered as the breadth of stocks driving the rally expanded in June beyond technology to include sectors such as industrials. The S & P 500 is up more than 6% so far this quarter and more than 14% year to date. Summer rallies have typically scored as the weakest of the four seasonal advances, according to the Stock Trader's Almanac. While the coming earnings season may show a year-over-year decline in profits, Detrick said the potential to exceed already-lowered expectations from Wall Street could push stocks higher. Cooling inflation data may also make investors optimistic that the Federal Reserve is nearly done hiking interest rates, which in turn would improve the outlook for growth stocks. A continuation of those trends could lead the S & P 500 to an all-time high in the second half of the year, Detrick said. "The realization that the economy's on better footing could be the spark plug to keep the surprise summer rally going," Detrick said. "If more good news comes like we think it can in the form of [a] better economy than people give it credit, that could keep stocks doing pretty well."