In history, July has been an excellent month for US stocks. But this year, the situation may be different. Strategists say that even though there is a seasonal advantage, the possibility of a summer correction in US stocks still exists.

In the first half of 2024, US stocks are expected to end on a positive note, and the rebound of some of the world's largest technology companies has driven major indexes to set multiple historic highs. If past history can serve as a reference, the good times of the US stock market may continue until July, but not all stocks can enjoy the summer rise dividend.

Since 1928, July has averaged the best performance for US stocks throughout the year. According to Dow Jones Market Data, during this period, the S&P 500 index has averaged a 1.7% increase in July and has closed higher than the opening price more than 60% of the time during this month.

Since 1897, The Dow Jones Industrial Average has shown the best monthly performance in July, with an average monthly increase of 1.4%. According to Dow Jones Market Data, the proportion of positive returns recorded in July for the Dow Jones Industrial Average is close to 65% since 1897.

The three major US stock indexes have posted gains for nine consecutive Julys, while the small-cap Russell 2000 has risen for seven consecutive years.

This strong performance has naturally sparked discussions about the summer rise of the US stock market, but Jeffrey Hirsch, editor of The Stock Trader’s Almanac, warns investors to beware of this hype, as summer rises in history are actually the weakest of the four seasons.

Since 1971, July has been the beginning of the four worst months for the Nasdaq Composite Index, with an average monthly increase of less than 1%.

In a report to clients last week, Hirsch wrote: "As we move into the second half of the year, new fund flows and a full month of summer typically lead to dynamic trading creating a bullish beginning. However, he added that in the past 21 years, almost all of the gains in July have occurred in the first 13 trading days of the month."

Hirsch said that in the meantime, in election years since 1950, July has often been a "dull month full of volatile trading."

The situation of small-cap stocks is also not optimistic. According to data from Dow Jones Market Data, since 1987, the average return rate of the Russell 2000 index in July is 0.3%, making it the fourth worst month for the Russell 2000 index throughout the year.

Since entering 2024, the differences in the US stock market have become increasingly extreme. This difference became more extreme in June. During the most recent 10 trading days until Tuesday, the Dow and the Nasdaq had opposite trends on 8 trading days, marking the highest record since 1995.

Adam Turnquist, chief technical strategist at LPL Financial, said: "While there has been a constant rise in the US stock market, the breadth expansion has been weak, which is the most significant rebound we have seen in a while. We see that when the market is at a historical high, breadth indicators reach record lows." Therefore, he said: "I think you can say that we may see a stoppage of the rising trend of US stocks in the summer, and the possibility of a pullback is definitely possible."

Therefore, he said: "I think you can say that we may see a stoppage of the rising trend of US stocks in the summer, and the possibility of a pullback is definitely possible."

Editor/Somer