Why Investors Should Stay Low in The Second Half of July
Notwithstanding the current volatility of the bourse, July has proved to be a good month for the primary equity indexes. For instance, the S&P 500 SPX, -0.71% has gone up by 2.1%. Sources posit that July is deemed the fifth-best month for this index as it always records a typical gain of 1% in July with lower odds of having a positive month. According to the Stock Trader’s Almanac, it had recorded only 37 positives out of the 67 years. The benchmark index has, however, gone ahead to perform better than expectations in the first half of the year.
Sources claimed that over the last 67 years, July turned out positive for the Dow Jones Industrial Average about 42 times and recorded negatives of about 25 times. The index has increased by approximately 1.9% since the month began. Similarly, the Nasdaq Composite Index COMP,-0.55% has also gone up with 2.8%.
As far as 2018 has gone, the Dow has gone up with less than 0.1%, the S&P has gained with about 3.8% while the Nasdaq has recorded about 12% owing to the large capitalization of its internet and tech stocks. The Nasdaq has reportedly remained the best performing index of the three main indexes since the year began. Specifically, the Dow’s weakness is linked to the increasing trade tensions between the U.S. and its foremost trading partners which have more pronounced effects on the multinational stocks of the Dow.
As highlighted by the Stock Trader’s Almanac, the good performance of the equity markets shouldn’t be surprising as history reveals that July has always been a strong month year in year out for the major indexes.
However, analysts have highlighted that these gains mostly occur only in the first half of the month, and this would imply that investors who intend to jump on this seasonal trend might have already missed the opportunity to do so. The operation of this trend was further reiterated by the WSJ Market Data Group stating that July has always been a month that has a strong beginning and a weak finish since 1950.
According to the data, the S&P 500 in the first half of July has increased about 1.45% on an average while the second half has, however, witnessed gains lesser than O.1%. Further, it was claimed that the seasonal trend became more evident in 2010 when the benchmark index gained 2.16% in the first two weeks of July 2010 but recorded less than 0.1% in the other half of the month. Thus, analysts have suggested that with only a few days left till trading days in July gets to the second half, the current performance of the S&P index stands as a confirmation of the occurrence of the seasonal trend.
Media outlets have, however, reported that if the trend characteristic of the latter half of July occurs this year, it would have drastic effects on the current market level. Further, analysts have projected that stocks may remain volatile beyond the following trading weeks of July.
According to sources, this projection had to do with the fact that recent trading has been significantly affected by the uncertainty of trade policies which has made investors anxious that the worsening trade relations between the U.S and its main trading partners relations could lead into a full-blown trade war. If such happens, the economic growth would be drastically affected. Also, any positivity already recorded in the economic data, as well as the corporate earnings growth, would also be negatively impacted in the presence of trade wars.
In addition to the historical trend revealing that the latter half of July might not be the best, another factor which may affect the stock markets is the escalation in the trade disputes between the U.S. and its major trading countries.
Media outlets reported that the trade disputes have caused several investors to remain anxious about the effect which the tariffs would have on their ability to enjoy the full benefits of the growth of the economy. Sources claimed that several companies that previously placed focus on the strength of company profits are now giving more attention to the effect which the implementation of the threatened imposition of tariffs on additional $200billion worth of China products would have on the stock markets, a factor which they previously didn’t take into consideration.
More in Investments
SoftBank’s CEO Has Lost $70 Billion, But How Is He Still a Billionaire?
Masayoshi Son, SoftBank Group CEO, fondly referred to as “Masa” estimates that their subsidiary SoftBank Vision Fund has investments worth $70...March 20, 2019
Here’s Why Captain Marvel’s Success Is An Important Milestone in Cinematic World
The Marvel Cinematic Universe, otherwise known as the MCU, has reached heights never thought possible when it comes to displaying comic...March 20, 2019
How to Prepare for an Unexpected Early Retirement
One of the reasons why people work so hard is so that when they retire, they would have enough money to...March 20, 2019
BEST Investment Tips to Help You Achieve Your Retirement Goal
Investment has a top spot on the list of expert-suggested ways of increasing wealth, establishing solid future fallback plans and saving...March 20, 2019
Another Economic Crisis Could Be on the Horizon, But Where Will it Start?
The banking system has learned some hard lessons from the 2008 financial crisis which shook the global economy to its core....March 20, 2019
Ten Years After the Financial Crisis, What Have We Learned So Far?
In 2008, thousands of American workers were forced to postpone their retirement after losing pension funds in one of the biggest...March 20, 2019
Johnny Depp is Apparently Broke! Here’s How He Scorched His Entire Fortune
Back when the Pirates of the Caribbean franchise was the hottest thing in town, the movies’ main man, Johnny Depp, was...March 19, 2019
These Are the Stocks to Invest in If You Want to Beat the Market
Hunting for yield just received a shot of “ease-up” adrenaline, if we could call it that, because investing in winning stocks...March 19, 2019
Parents Are Giving Early Money Lessons to Their Kids — Here’s Why You Should Too
Gen X and Millennial Parents A Study recently released by Capital Group revealed that parents nowadays are having talks with their...March 19, 2019