July on Par

30Jun11

The end of June is nigh. This is a quick look at how the U.S. market has performed historically in July.

First the (misleading) numbers…

From this 30,000 foot view, July has trounced the average calendar month with nearly twice the monthly return.

But averages can be 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 in July (red) versus the average month (grey) each year since 1930.


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

July outperformed from 1930 until the late 1960’s, but since then has failed to even keep pace with the average month.

The next graph makes this more clear. Below is the same test (July in red, average month in grey) starting from 1970.


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

Clearly, despite performing strongly before 1970, July has not consistently outperformed or underperformed the average calendar month since.

Like all seasonality plays this one has by no means been a sure thing and doesn’t by itself justify a trade, but I’m calling the calendar month bias for July as NEUTRAL.

See the monthly seasonality map for daily seasonality predictions in July.

Happy Trading,
ms

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One Response to “July on Par”


  1. 1 Thursday links: lender responsibility | Abnormal Returns

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