Bottle rocket wars were one of the highlights of my teenage years. We would hold the bottle rocket between two fingers and shoot it right at a friend. Somehow no one lost an eye and my mom didn’t wring my neck when she would eventually find out about it. These days I prefer celebrating in a peaceful nonbodily maiming way. I hope the stock market does July in a peaceful non-maiming way as well.
As the calendar has turned to July, most of us want to forget the first six months of 2022. The first half of this year was rough for the market but thankfully July is historically a good month for stocks. Over the past 10 years, the month of July has been particularly good, with the S&P 500 Index averaging a monthly gain of about 2% according to LPL.
Both stock and bond markets have been challenging this year, but history gives us a little optimism. Right after the seven biggest two-quarter market drops since WWII, stocks rose an average of 21.5% over the next six months, going positive every time.
For several months now both bonds and stocks have been going down in unison, a relatively rare occurrence. This relationship has been starting to normalize in recent weeks, suggesting a possible return of the historical pattern but it’s dependent on how the Federal Reserve’s policy plays out. However, long-term rates traditionally peak before the Fed ends its interest rate hiking campaigns, which could be good news for bonds in the coming months.
As for stocks, I feel like things could start getting better. Several indicators show stocks were oversold but it’s too early to say. I think any good news on the inflation front could spark a rally. LPL Research updated its year-end target for the S&P 500 Index to a range of 4,300 to 4,400, which allows for potential 12-15% gains from current levels through year-end.
This may happen, especially if a recession can be averted in 2022 as I expect. Though many analysts believe if our economy does go into recession in the next 18 months, it would be a minor recession.
I still like celebrating America’s birthday. I enjoy remembering the crazy things I used to do with fireworks when I was a boy. As things usually go, we eventually got bored with the bottle rocket fights which led to roman candle fights. Having eight shots was great until we realized there was the occasional backfire, which were painful. Let’s hope the market doesn’t have any accidental backfires this July either.
Have a blessed week!
https://www.steadfastwealth.net/richard-baker
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Founder & Executive Wealth Advisor at Steadfast Wealth Management
2760 East Sunshine St. Springfield, MO 65804
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any individual. All performance referenced is historical & is no guarantee of future results. All indices are unmanaged & can’t be invested into directly. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful
