The real summer rally period

Key Points

• The phrase "Dog Days of Summer" applies very aptly to overall stock market performance during the summer months of June, July, and August
• One period tends to shine (and makes the rest of the summer look that much worst by comparison)

June, July, and August

The chart below displays the cumulative % return for an investor who held a long position in the S&P 500 Index every year ONLY during June, July, and August, starting in 1940 (through 6/23/2022).

At a glance, the results seem OK, if a bit choppy. The cumulative % gain was +168%. Before looking more closely for a "summer rally," let's first put this in perspective versus the rest of the year.

All Other Months

To put the June/July/August returns from the chart above into perspective, the chart below displays:

• Cumulative % return for an investor who held a long position in the S&P 500 Index every year ONLY during June, July, and August, starting in 1940 (red line = +168%). In other words: The black line from the chart above is the red line in the chart below.         
• Cumulative % return for an investor who held a long position in the S&P 500 Index every year ONLY during ALL MONTHS OTHER THAN June, July, and August, starting in 1940 (black line = +11,240%)    

All of a sudden, summer month returns don't look so great.

The Summer Rally Period

The period we will focus on incorporates 12 trading days by combining:

• The last three trading days of June
• The first nine trading days of July

We will refer to this as the "Summer Rally Period." For 2022, this period extends from the close on 6/27/2022 through the closing on 7/14/2022.

We will refer to all other trading days during June, July, and August as "All Other Summer Days."

In the chart below:

• The black line displays the cumulative return (+209%) for SPX during the "Summer Rally Period"
• The red line shows the cumulative return (-13%) for SPX during "All Other Summer Days"

The test period extends from 1940 through June 23^rd, 2022.

The S&P 500 Index has lost ground during "All Other Summer Days." Of course, results can vary widely from year-to-year.

Summary of Results

The table below displays a "Summery" er, summary of results for Summer Rally Periods versus All Other Summer Days.

What the research tells us…

As with any seasonal trend, results can vary widely from year-to-year. That said, investors looking to avoid the "Summertime Blues" might be best advised to give the market the benefit of the doubt from late June into early July.