No Time For Summer Vacation: The Stock Market Has Been Red Hot In The Month Of July

On Wall Street, the month of July has a reputation for low market volume and a lack of big news headlines. Those trends are understandable considering many Americans take summer vacations, but traders that have written off July in recent years have missed some of the biggest stock market gains of the year.

Heating Up

July has been the second best month of the year for stocks over the past decade, according to LPL Financial. The S&P 500 has averaged roughly a 2.25 percent gain in the month of July over the past 10 years, second only to its 2.6 percent average gain in the month of March. Perhaps the reason investors tend to write off July is because it's sandwiched between June and August, two of the three worst months for the S&P 500 in the past decade.

Ten years may be a relatively small sample size, but LPL found July is still a relatively strong month for stocks going all the way back to 1950. Over the past 68 years, the S&P 500 has averaged about a 1 percent gain in July, trailing only March, April, November and December.

Why Is July So Hot?

One of the biggest reasons July has been relatively strong is because of second-quarter earnings season. S&P 500 earnings were up 25 percent on average in the first quarter, and consensus analyst estimates are calling for a 20-percent increase in the second quarter as well.

So far in 2018, the SPDR S&P 500 ETF Trust SPY is up just 1.5 percent. If recent history is any indication, the index could potentially double that return in the month of July alone if Q2 earnings season is better than expected.

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