Charles Dickens didn’t have the stock market in mind when he wrote A Tale of Two Cities, but depending on your time horizon, we’re entering what could be classified as one of the best of times (next month) and one of the worst of times (next three months) of the year for equities. Starting with the shorter-term window, based on the last ten years of data, the period from the close on 7/2 out over the next month has historically been a positive time of year. Of the eleven sectors, all but one (Energy) have averaged gains in the month following the close on July 2nd. Taking a longer-term time frame, the three-month period following the close on July 2nd has been one of the weakest times of year for equities!

Using the S&P 500 as an example, over the last ten years, the median one-month performance from the close on July 2nd has been a gain of 2.5% with positive returns 80% of the time. Over the following three months, though, the median change is a decline of 0.5% with gains just 50% of the time. A decline of 0.5% may not sound like much, but when you take into account the fact that the first month of those three months includes a median gain of 2.5%, it suggests a good deal of volatility between now and early October.

The chart below shows the median one and three-month returns of the S&P 500 and all eleven sectors from the close on July 2nd over the last ten years. For the S&P 500 and all ten sectors, there are some pretty wide divergences, most notably for Materials, Industrials, and Consumer Staples where the swings range from a median gain of at least 1% to a median decline of at least 1%. Two sectors that have stood out from avoiding the weakness are Financials and Technology as they are the only two sectors that have median gains of at least 1% in both the one- and three-month time frames.  The most notable aspect of the chart, however, is that besides Energy, which has still been negative over both time frames, no other sector has a better median performance in the three months following the close on July 2nd than the one month following. This is one case where longer holding periods haven’t been an advantage.

The next chart shows the consistency of positive returns for the S&P 500 and all eleven sectors. Here again, Energy is the only exception to the trend of consistency over the following three months not being worse than the one month. Additionally, the only sectors that have experienced positive returns more than 50% of the time for both periods are Financials and Technology.

More By This Author:

Another Day, Another Week, Another Month…
First Half 2024 -- That's A Wrap
S&P 500 Four Under Five