Stocks extended their monthly winning streak to five in July, driven higher by better than expected economic growth and better news on inflation. Here are the returns for the month and the year of key indices.
- The S&P 500 (SPY) was up 3.2% in July and is now up 17% on the year.
- The Vanguard Global Stock Index (VT) was up 3.5% in July and is now up 14% on the year.
- The tech-heavy NASDAQ 100 (QQQ) was up 3.8% and is now up 42% on the year.
The strong monthly gain was driven by two key factors.
Better economic growth: Earlier this year the consensus opinion was a recession in the U.S. in 2023. But now, analysts are predicting that the U.S. is going to avoid a recession in 2023 and its giving stocks a boost.
U.S. will avoid recession in 2023 despite rate hikes
Better inflation data: The terrible inflation from the last two years continues to subside. This is always a tail wind for consumer spending, the economy, and stock market.
U.S. annual inflation posts smallest rise in two years
Here is what to Expect for the Next Two Months
Stocks are having a good year but I see a few speed bumps on the horizon. In the short run, I am expecting to see higher volatility in the next few months.
August and September are historically two of the weakest months of the year for stocks. Take a look at this chart below.
chart from wallstreetzen
However, after some potential seasonal weakness in August and September, I expect stocks to deliver more gains in October, November and December. As you can see in the chart above, those three months are historically very strong for stocks.
Secondly, I see many studies that show when stocks log five winning months in a row, it usually leads to more gains in the next six months. Take a look at this great stat in the tweet below.
I View Weakness in Stocks as a Chance to Deploy Cash: Based on history and these great studies, I view weakness in stocks as an opportunity to deploy cash. And that’s what I will be doing as an advisor in the next few months – I will be looking to deploy more cash into stocks on weakness.
I’ll be back with another update next week – have a great day!
Disclaimer: This is not investment advice. This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
