July: Once Great, Now Blah

29Jun10

This is a quick look at how the U.S. market has performed historically in July.

First the (misleading) numbers…

Looking at just average returns over the last 80 years, July has been about twice as bullish as the average month in terms of return (1.6% vs 0.8%) and return relative to volatility (25.1% vs 13.7%).

But averages are misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long the S&P 500 index in July (red) versus the average month (grey) each year since 1930.

[logarithmically-scaled, growth of $10,000]

BIG returns prior to the late 1960’s, but notice how returns peter out after that. Let’s drill down on that more recent performance. The following chart only covers from 1970.

[logarithmically-scaled, growth of $10,000]

Clearly in more recent history, July has not been consistently bullish or bearish.

No useful edge here.

Happy Trading,
ms

Geek note: all S&P 500 returns are dividend-adjusted so they will NOT match the S&P 500 price-only index. Dividends are interpolated from quarterly data.

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