July Almanac, Stats & Calendar: Historically Best Month of Q3
By: Jeffrey A. Hirsch & Christopher Mistal
June 23, 2022
July historically is the best performing month of the third quarter however, the mostly negative results in August and September tend to make the comparison easy. Two “hot” Julys in 2009 and 2010 where DJIA and S&P 500 both gained greater than 6% and strong performances in 2013 and 2018 have boosted July’s average gains since 1950 to 1.3% and 1.1% respectively. Such strength inevitability stirs talk of a “summer rally”, but beware the hype, as it has historically been the weakest rally of all seasons (page 76, Stock Trader’s Almanac 2022).
July begins NASDAQ’s worst four months and is the fourth weakest performing NASDAQ month since 1971, posting a 0.6% average gain. Dynamic trading often accompanies the first full month of summer as the beginning of the second half of the year brings an inflow of new capital. This creates a bullish beginning, middle, a soft week after options expiration and some strength towards the end. The last trading day of July has a bearish bias over the last 21 years.
[Recent 21-Year July Market Performance (2001-2021) Seasonal Pattern Chart]
July’s first trading day is the third best performing first trading day of all twelve months with DJIA gaining a cumulative 1346.32 points since 1998. Over the past 21 years, DJIA’s first trading day of July has produced gains 76.2% of the time with an average advance of 0.30%. S&P 500 has advanced 85.7% of the time (average gain 0.35%). NASDAQ has been slightly weaker at 76.2% (0.24% average gain). No other day of the year exhibits this amount of across-the-board strength which makes a case for declaring the first trading day of July the most consistently bullish day of the year over the past 21 years.
Trading on the day before and after the Independence Day holiday is often lackluster. Volume tends to decline on either side of the holiday as vacations begin early and/or finish late. Since 1980, DJIA, S&P 500, NASDAQ and Russell 2000 have recorded net losses on the day after.
[Midterm Election Year July Table]
Midterm-year July rankings are something of a mixed bag, ranking #3 for DJIA and #5 S&P 500, averaging gains of 1.3% and 0.9% respectively (since 1950); while NASDAQ (since 1974) and Russell 2000 (since 1982) midterm Julys rank #12. NASDAQ has only advanced in four of the last twelve midterm Julys with an average loss of 1.9%. Russell 2000 has advanced only three in its last ten with an average decline of 3.8%.
[July 2022 Vital Stats Table]
NASDAQ’s 12-Day Midyear Rally
In the mid-1980s the market began to evolve into a tech-driven market and the market’s focus in early summer shifted to the outlook for second quarter earnings of technology companies. In anticipation of positive results, over the last three trading days of June and the first nine trading days in July, NASDAQ typically enjoys a rally. This 12-day run has been up 29 of the past 37 years with an average historical gain of 2.6%. Look for this rally to begin around June 28 and run until about July 14.
After the bursting of the tech bubble in 2000, NASDAQ’s mid-year rally had a spotty track record from 2002 until 2009 with three appearances and five no-shows in those years. However, it has been quite solid over the last twelve years, up eleven times with a single mild 0.1% loss in 2015. Last year, NASDAQ advanced a solid 2.0% during the 12-day span.
[NASDAQ Midyear Rally Table]