July Almanac: Historically Best Month of Post-Election Year

StockTradersAlmanac

Two recent “hot” Julys in 2009 and 2010 where DJIA and S&P 500 both gained greater than 6% have boosted July’s average gains since 1950 to 1.2% and 0.9% respectively. Such strength inevitability stirs talk of a “summer rally”, but beware the hype, as it has historically been the weakest rally of all seasons (page 70, Stock Trader’s Almanac 2013).

July begins NASDAQ’s worst four months and is the second worst performing NASDAQ month since 1971, posting a mere 0.02% average gain. Dynamic trading often accompanies the first full month of summer as the beginning of the second half of the year brings an inflow of new funds. This creates a bullish beginning, a soft week after options expiration and strength towards the end.

Trading on the day before and after the Independence Day holiday is often lackluster. Volume tends to decline on either side of the holiday as vacations begin early and finish late. Since 1980, DJIA, S&P 500, and NASDAQ have recorded net losses on the day after. Russell 2000 is negative on the day before and the day after.

Post-election year Julys rank at or near the top of all post-election year months. DJIA and S&P 500: +2.0%, #1 (since 1953); NASDAQ (since 1973): +3.1% #2; Russell 2000 (since 1981): +2.6% #4. Delving deeper into this data reveled that aside for the halcyon years of the last secular bull that ran from 1982-2000, all but one of these “hot” Julys was preceded by a flat to down first half of the year. Only 1961’s first half remotely resembles this year. Considering this past record, the odds seem stacked against another “hot” post-election year July performance. 

DJIA and S&P 500 Post-Election Year July Performance Since 1953

July (1950-2012)
  DJI SP500 NASDAQ Russell 1K Russell 2K
Rank   4   6   11   8   11
# Up   39   34   21   15   16
# Down   24   29   21   19   18
Average %   1.2   0.9   0.02   0.5   -0.5
4-Year Presidential Election Cycle Performance by %
Post-Election   2.0   2.0   3.1   3.1   2.6
Mid-Term   1.2   0.8   -2.4   -1.0   -4.3
Pre-Election   1.1   0.8   0.8   0.4   0.5
Election   0.3   0.2   -1.3   -0.3   -0.9
Best & Worst July by %
Best 1989 9.0 1989 8.8 1997 10.5 1989 8.2 1980 11.0
Worst 1969 -6.6 2002 -7.9 2002 -9.2 2002 -7.5 2002 -15.2
July Weeks by %
Best 7/17/09 7.3 7/17/09 7.0 7/17/09 7.4 7/17/09 7.0 7/17/09 8.0
Worst 7/19/02 -7.7 7/19/02 -8.0 7/28/00 -10.5 7/19/02 -7.4 7/2/10 -7.2
July Days by %
Best 7/24/02 6.4 7/24/02 5.7 7/29/02 5.8 7/24/02 5.6 7/29/02 4.9
Worst 7/19/02 -4.6 7/19/02 -3.8 7/28/00 -4.7 7/19/02 -3.6 7/23/02 -4.1
First Trading Day of Expiration Week: 1990-2012
#Up-#Down   14-9   13-10   14-9   12-11   11-12
Streak   D2   D2   D2   D3   D3
Avg %   0.001   -0.1   -0.02   -0.1   -0.2
Options Expiration Day: 1990-2012
#Up-#Down   8-13   8-15   8-15   8-15   5-18
Streak   D1   D1   D1   D1   D1
Avg %   -0.6   -0.6   -0.7   -0.6   -0.8
Options Expiration Week: 1990-2012
#Up-#Down   13-10   10-13   10-13   10-13   10-13
Streak   U1   U1   U1   U1   D3
Avg %   0.2   -0.2   -0.1   -0.2   -0.4
Week After Options Expiration: 1990-2012
#Up-#Down   12-11   11-12   11-12   11-12   10-13
Streak   U4   U4   U5   U4   U5
Avg %   0.04   -0.1   -0.6   -0.2   -0.3
July 2013 Bullish Days: Data 1992-2012
  1, 8, 10, 11, 12 1, 8, 11, 12, 18 1, 8, 10, 11, 12 1, 11, 12, 18 1, 8, 11, 25, 30
  18, 25 25, 30 18, 25, 30 25, 30  
July 2013 Bearish Days: Data 1992-2012
  2, 19, 22 2, 19, 22 19, 22 2, 19, 22 3, 17, 19
           
 
   

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By Jeffrey A Hirsch and Christopher Mistal