The stock market's summer rally is going strong. But here's what can happen next.

In a recent MarketWatch article, SentimenTrader's senior analyst Jay Kaeppel highlighted that the stock market's traditional "summer rally" may soon give way to its weakest seasonal stretch of the year.

According to Jay Kaeppel, a senior research analyst at SentimenTrader, while the S&P 500 has rallied over 25% from its April 2025 lows - including a +2.9% gain during the formal "summer rally" period - historical data suggests that the period from late July through mid-October tends to be lackluster for equities. Since 1985, this span has produced a cumulative 49% loss, with a win rate of just 48%, making it one of the most uninspiring stretches on the calendar.

"So, is the stock market ‘doomed' to flounder and decline during this period? Not at all. Results can vary greatly year-to-year. Still, the main point is that investors who have become strongly bullish during the post-April sell-off lows may be wise to temper their enthusiasm for a while," Kaeppel noted. He emphasized that this is not a call for a bear market, but rather a reminder that even in strong uptrends, temporary pullbacks and sideways action are common - especially when sentiment turns overly bullish.

To access Jay Kaeppel's full research note and other market insights, visit sentimentrader.com.