July 17, 2026 · Michael Vodicka · 7 min read
Two weeks into July, the S&P 500 keeps doing what it’s done all summer — quietly climbing, within striking distance of a new record. Here’s where things stand, three reasons I like the setup, two risks I’m watching, and a look at earnings season and the fall calendar ahead.
The S&P 500 Is Grinding Higher in July 2026
Three weeks ago the S&P 500 (SPY) had just closed its best quarter since 2020. Since then, the leading index has continued to grind higher. It’s up about 1% on the month and sits less than 1% below its early-June record high. That puts us up 10.7% year-to-date — one of the strongest starts to a year in over a decade.
Let me walk you through what’s driving it, and how I’m reading the back half of the year.
S&P 500 Monthly Returns — 2026 YTD
A rocky first quarter gave way to a powerful spring rebound that has largely held.
+0.9%
-0.5%
-4.3%
+10.4%
+5.1%
-1.1%
+1.0%
★ Largest monthly gain since November 2020. *July month-to-date through the 15th. Source: S&P Dow Jones Indices, FactSet.
Notice the shape of that chart: a weak first quarter, then a powerful turn in April — the best month since 2020. What’s striking is how well the market has held those gains since. Outside of a mild dip in June, every month since the spring has been positive, and July has picked the trend back up. That’s the story of 2026 so far: a market that got knocked down early and has spent the spring and summer climbing back.
3 Reasons to Stay Optimistic on the S&P 500
A run like this doesn’t happen by accident. Three forces are still doing the heavy lifting heading into the back half of the year.
1. Earnings Are Still Doing the Heavy Lifting
This is the engine behind everything else. Second-quarter profits are tracking roughly 23% growth year-over-year, with energy and technology leading the way, and full-year 2026 earnings growth is now projected near 24% — among the strongest years in over a decade. When earnings estimates keep getting revised higher instead of lower, stock prices tend to follow.
2. Inflation Is Cooling Again
June’s inflation reading came in softer than expected, easing one of the market’s biggest overhangs and giving the Fed a little room to breathe. Cooler prices are exactly what a market sitting near record highs wants to see — they keep real spending power intact and take some of the pressure off the rate debate that’s dominated the year.
3. The Calendar and the Breadth Are on Our Side
The S&P has now risen every single July for 11 straight years — and this year’s gains are broad, not narrow. Small caps posted their best first half since 1991, and every sector of the index is projected to grow revenue in 2026. When the gains are this widely shared, rather than resting on a handful of mega-cap names, the rally tends to have sturdier legs under it.
S&P 500 Earnings Growth Is Accelerating
Year-over-year EPS growth — Q1 actual, Q2-Q4 consensus estimates
+27.9%
+23.1% (E)
+26.7% (E)
+24.3% (E)
Source: FactSet Earnings Insight. (A) = actual. (E) = consensus estimate.
Up Next: Q2 Earnings Season Is Underway
The single biggest driver of this market is about to get its next report card. Q2 earnings season kicked off on July 14, when the big banks — JPMorgan, Bank of America, Goldman Sachs, Wells Fargo and Citigroup — reported first. Banks are cyclical businesses, so their results, and their tone on loan demand and credit quality, act as an early read on the health of the whole economy.
Expectations are high. Analysts see roughly 23% earnings growth and about 11% revenue growth — the fastest top-line pace since 2022, and the second straight quarter of 20%-plus profit growth. That’s a tall bar to clear, which means the market will scrutinize forward guidance just as closely as the headline numbers.
The number I’m watching most
Big Tech has poured more than $220 billion into AI over the past year alone. This is the quarter investors start demanding proof that all that spending is turning into real revenue — not just rising costs. Whether Microsoft, Alphabet, Meta and Amazon can show AI paying its own way will set the tone for the very group that has led this entire rally.
2 Reasons to Stay Cautious
No market climbs without risks. Two stand out to me right now.
1 The Fed May Be Leaning to Higher Rates
Here’s what’s changed since my mid-year note: the market is no longer betting on rate cuts. With lingering Middle East energy costs keeping inflation sticky, traders now put nearly a 60% chance on higher rates by October. At roughly 20 times forward earnings — above the 10-year average — this market has little cushion if the Fed tightens instead of eases.
2 Geopolitics Remains a Wildcard
The Iran conflict isn’t fully resolved, and oil remains a wildcard that can reignite inflation overnight. Energy prices were the single biggest source of the market’s anxiety earlier this year, and a renewed spike would land squarely on the Fed’s inflation fight — the one risk with the power to change the whole picture in a hurry.
Are We Heading Into a Weak Stretch?
A few of you have asked whether the calendar is about to turn against us. It’s a fair question — and August tends to get blamed for it. But August has a worse reputation than it deserves: going back to 1950, it’s close to a coin flip, essentially flat on average. The month to actually respect is September, the single weakest month of the year, with a slightly negative average return and a habit of finishing down more often than up.
So yes, late summer into early fall is historically the market’s most sluggish stretch. But I’d put the emphasis on context, not fear. These are averages across 75 years, not a forecast for this year — September has still closed higher nearly half the time. And that soft patch has tended to be a setup rather than a warning: the market’s strongest three-month run of the year has historically arrived right after it, from November into January.
The Late-Summer Lull — and What Follows
S&P 500 average monthly return, August through December (since 1950)
≈0%
-0.7%
+0.8%
+1.7%
+1.4%
Averages since 1950; individual years vary widely. Source: S&P Dow Jones Indices.
And What About the Midterms?
2026 is a midterm election year, and history says that matters for the calendar. Year two of the four-year presidential cycle has been the weakest and most volatile of the four. Since 1960, the S&P has averaged a 2.6% decline from May through October in midterm years, versus a 3.1% gain over that same stretch in other years. So some added chop into the fall would fit the historical script.
But here’s the part I’d underline. That midterm soft patch has historically been one of the best entry points in the entire cycle. Since 1948, the S&P has gained an average of about 14% in the twelve months following a midterm election — well over double the roughly 6% averaged in comparable non-midterm stretches. The weakness has tended to be the setup for the strength.
Midterm Weakness, Then Strength
Average S&P 500 return — the midterm soft patch vs. the twelve months that follow
-2.6%
+3.1%
+13.9%
May-Oct averages since 1960; 12-month post-election average since 1948. Source: S&P Dow Jones Indices.
The takeaway isn’t to brace for a fall. It’s to expect that any autumn softness is normal — and that, historically, it has rewarded the investors who stayed put through it rather than selling into it.
“The easy headlines say the rally is tired. The earnings say it isn’t. My job is to follow the earnings, not the headlines — and right now they still point higher.”
— Michael Vodicka, Vodicka Group
What to Expect From Here
After a start this strong, it would be normal to see some consolidation — markets don’t move in a straight line, even in great years. A softer stretch into the fall would be seasonal, not structural, and in midterm years that dip has often set up the strongest gains. The bigger picture is what matters: earnings are accelerating, inflation is cooling, and the rally has broadened well beyond a handful of mega-cap names. The Fed and geopolitics are the two things I’m watching most closely.
I’m not making major changes to client portfolios. The playbook hasn’t changed: stay invested, stay diversified, and let the engine of corporate earnings do the heavy lifting. That approach is up 10.7% this year, and I expect it to keep paying off through the back half.
Related Reading from Vodicka Group:
→ Mid-Year 2026 Market Update: A First Half to Remember
→ S&P 500 June 2026 Update: A Quiet Month and a Calendar That’s Turning
→ A Blockbuster April for the S&P 500
→ Schedule a Free Portfolio Review
As always, if my outlook changes, my clients and readers will be the first to know. I’ll be back with another update soon — have a great week!
Until next time,
Michael Vodicka
Founder & Lead Advisor · Vodicka Group
Disclaimer: 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.
