Historical trends bode well for July and the second half
Man this year is flying. I can't believe that July is already here. I usually don't put a whole lot of faith in technical analysis or seasonal mumbo jumbo, but I found the following information on the market's historical movement in July interesting nonetheless.
Historically, July has historically been a very strong month for the market. Over the past century, the Dow has gained 1.24% on average during the month, including an average increase of 1.17% over the past two decades. Furthermore, over the past two decades, July's returns have been positive 70% of the time. July has traditionally been the best summer month for stocks.
July 1st also marks the start of the second half of the year. Since 1927, the S&P 500 has averaged an increase of 3.64% during the first half of years and 3.41% in the second half. When the S&P is positive at the halfway mark it has averaged a gain of 5.51% during the second half with the second half of the year providing positive returns 74% of the time. This compares to the index increasing only slightly more than half of the time with an average gain of only 0.02% after a negative first half.
Looking at historical trends, it appears as though we are setting up for positive returns during the second half of 2009 and a solid July. Of course, I personally think that the market could run into trouble once companies start reporting their second quarter earnings, or lack there of, in the near future. We are in a very tough environment right now and stock valuations are ultimately based upon how much money companies can make and how much they will grow in the future. I suspect that Mr. Market is being a tad optimistic on both fronts right now. Time will tell.
While all of these facts about the short term movement of the market are interesting, I personally prefer to purchase high quality, high yielding stocks and bonds and hold onto them rather than trade so this information doesn't really do much for me. At least it's more productive and relevant to investing than discussing mysterious black helicopters flying around.
All of the above information is courtesy of Bespoke Investment Group. Anyone who has never visited their website definitely should. There's some cool free stuff on there. Plus, they'rerunning a special promotion that provides anyone with access to some of their premium reports for free for a couple of days right now.