Key Takeaways
- The S&P 500 has registered a positive return every July for nine consecutive years, from 2015 to 2023, a statistical anomaly that warrants closer inspection rather than blind acceptance.
- This historical performance appears linked to structural factors such as the start of the Q2 earnings season, corporate buyback activity, and institutional repositioning for the second half of the year.
- The streak’s predictive power is challenged by the current macroeconomic regime of higher interest rates and elevated equity valuations, which differs significantly from the accommodative environment of the preceding decade.
- The exceptional 9.11% gain in July 2022 occurred within a broader bear market, highlighting its nature as a relief rally rather than a standalone bullish signal, a crucial context for today’s market.
- Relying on this seasonal pattern has become a crowded trade, increasing the risk of a sharp reversal should any negative catalyst emerge, such as disappointing earnings or hawkish central bank commentary.
The observation that the S&P 500 has concluded every July with a gain since 2015 is a compelling piece of market trivia that often resurfaces this time of year. This nine-year unbroken streak invites analysis into whether it represents a durable seasonal edge or merely a statistical artefact of a specific market regime. While historical patterns can offer valuable context, their utility as a predictive tool diminishes when the underlying economic and monetary conditions undergo fundamental shifts, a situation that aptly describes the current landscape.
Anatomy of a Winning Streak
An examination of the data confirms the consistency of July’s positive performance over the last decade. The returns have varied in magnitude, from the modest to the particularly robust, but the direction has remained unwavering. The performance during this period stands in contrast to longer-term historical averages, suggesting a unique set of drivers may have been at play.
The table below details the monthly percentage change for the S&P 500 index each July from 2015 to 2023.
| Year | S&P 500 July Return (%) | Context |
|---|---|---|
| 2015 | +1.95% | Preceded Greek debt crisis fears and China’s market turmoil in August. |
| 2016 | +3.56% | Recovery and stabilisation following the surprise Brexit vote in June. |
| 2017 | +1.93% | Period of remarkably low volatility and steady global growth. |
| 2018 | +3.60% | Strong earnings growth before trade war anxieties intensified later in the year. |
| 2019 | +1.31% | Market digested a Fed rate cut amidst signs of a slowing global economy. |
| 2020 | +5.51% | Fiscal stimulus and tech-led rally during the COVID-19 pandemic recovery. |
| 2021 | +2.27% | Continued economic reopening and strong corporate earnings. |
| 2022 | +9.11% | A powerful bear market rally after the worst first-half performance in decades. |
| 2023 | +3.11% | Optimism around an economic ‘soft landing’ and cooling inflation. |
Source: Data compiled from historical index performance records.
The standout figure is the 9.11% surge in July 2022. It is critical to recognise this was not a sign of standalone market strength but rather a classic relief rally. It followed a punishing first half of the year where the index had fallen significantly, driven by the US Federal Reserve’s aggressive pivot to combat inflation. This context is essential; the month served as a temporary reprieve in an overarching downtrend, not a continuation of a bull market.
Structural Drivers Versus Macro Headwinds
Several structural factors contribute to July’s historically firm footing. The month marks the unofficial start of the second-half of the year, a natural point for institutional investors to reassess and rebalance portfolios. Furthermore, the kick-off of the Q2 earnings season in mid-July often provides a catalyst. With expectations frequently managed lower by corporations beforehand, even in-line results can be met with relief, while positive surprises can fuel upward momentum, particularly in lower-liquidity summer trading conditions.
However, these historical tailwinds now face considerable headwinds. The primary difference between the 2015 to 2021 period and today is the monetary policy regime. The era of zero, or near-zero, interest rates and quantitative easing provided a forgiving backdrop for risk assets. Today’s environment of higher borrowing costs and quantitative tightening fundamentally alters valuation calculus and market dynamics. An S&P 500 trading at a forward price-to-earnings ratio well above its long-term average has less room for error, making it more susceptible to negative shocks from earnings disappointments or unexpectedly hawkish central bank signals.
A Crowded Trade with Diminishing Returns
The very popularity of this July seasonality has become a risk in itself. As a market narrative becomes widely known and accepted, it encourages anticipatory positioning, turning it into a crowded trade. This can lead to front-running, where gains are pulled forward into late June, leaving July itself vulnerable to a “sell the news” reaction. If the expected positive catalysts fail to materialise with sufficient force, the unwind from this crowded positioning could be sharp and rapid, potentially leading to the very outcome traders were betting against.
Ultimately, while the nine-year streak is statistically significant, treating it as a playbook for the present is a fraught exercise. It is a reflection of a past regime. A more prudent approach involves weighing the seasonal pattern as one minor data point among many, with far greater emphasis placed on current earnings data, inflation prints, and central bank rhetoric.
As a closing hypothesis, the July effect’s greatest risk may not be a simple failure but a bull trap. A market that rallies early in the month on the back of this narrative could draw in the last remaining bulls, setting the stage for a reversal later in the month or into the historically more volatile August and September period. The end of this streak, whenever it occurs, is likely to be less about the month itself and more about the confirmation that the market’s underlying structure has indeed changed.
References
Barchart. (2024, July 10). [Post showing S&P 500 July performance stat]. Retrieved from https://x.com/Barchart/status/1811155333873643899
Barchart. (2024, February 8). [Post related to market performance]. Retrieved from https://x.com/Barchart/status/1756076187124748325
Barchart. (2023, July 20). [Post showing S&P 500 has been green every July since 2016]. Retrieved from https://x.com/Barchart/status/1682132948991070208
FOREX.com. (n.d.). Nasdaq 100, S&P 500 seasonality analysis for July. Retrieved from https://forex.com/en-uk/news-and-analysis/nasdaq-100-sandp-500-seasonality-analysis-for-july
Investing.com. (n.d.). US S&P 500 Historical Data. Retrieved from https://www.investing.com/indices/us-spx-500-historical-data
Macrotrends. (n.d.). S&P 500 Historical Chart Data. Retrieved from https://www.macrotrends.net/2324/sp-500-historical-chart-data
Macrotrends. (n.d.). S&P 500 Historical Annual Returns. Retrieved from https://www.macrotrends.net/2526/sp-500-historical-annual-returns
NASDAQ. (n.d.). Stock Market Soared in May and June. History Says S&P 500 Will Do So in July. Retrieved from https://www.nasdaq.com/articles/stock-market-soared-may-and-june-history-says-sp-500-will-do-july
SlickCharts. (n.d.). S&P 500 Returns. Retrieved from https://www.slickcharts.com/sp500/returns
TradingView / Cointelegraph. (n.d.). Bitcoin due to copy S&P 500 to hit new all-time high in July: Forecast. Retrieved from https://www.tradingview.com/news/cointelegraph:8048f92f3094b:0-bitcoin-due-to-copy-s-p-500-to-hit-new-all-time-high-in-july-forecast/
