Despite a pullback on the final day of the month, July was broadly positive for U.S. markets, continuing the recovery from the April lows. Below are the July returns for the popular benchmarks that investors track (Data provided by Y-Charts & Commonwealth Financial Network):

S&P 500 Index: +2.2%
Dow Jones Industrial Average: +0.1%
Nasdaq Composite Index: +3.7%
Russell 2000 Index: +1.7%
S&P Target Risk Moderate: +0.34%

With everything happening around the world this year, the stock market has shown impressive resilience. Since bottoming in early April, equities have continued to “climb the wall of worry,” overcoming a series of global challenges, including escalating trade tensions, the Israel-Iran conflict involving U.S. forces, and the ongoing war in Ukraine, to name a few.

That said, we’re not completely out of the woods. We’re now entering a seasonally weaker period for markets. Over the past five years, stocks have often struggled from late summer into early fall. Historically, August in particular has been a month marked by heightened volatility and negative headlines.

The chart below illustrates this “average” pattern for the S&P 500 over the past 20 years. The encouraging news? These late-summer dips have often been followed by strong market rallies beginning in Q4 and continuing through year-end.

Adding to the already challenging late summer months, post-election year Augusts tend to see more downside than the average year. Below is a graphic from Ryan Detrick at Carson Investment Research that highlights this trend.

Sharing this data isn’t intended to alarm investors; instead, it’s meant to put recent market strength into perspective. After one of the fastest recoveries in history—from the brink of a bear market to new all-time highs in just a few months, it wouldn’t be unusual for stocks to take a well-deserved breather.

As we’ve discussed before, markets don’t move higher in a straight line every week. Periodic pullbacks are a normal and healthy part of long-term market behavior. In fact, they help prevent the kind of excesses that often lead to bubbles and major market tops.

So, if we see a bit of volatility or a pullback in August, we view that as a constructive and necessary part of a sustainable market cycle.
As always, don’t hesitate to contact our team with any questions.