The S&P 500 Index closed the month of July with a 4.9 percent gain. What does this increase mean for the next few weeks and following three months? Research suggests markets continue to rally.
Since 2009, there were 13 individual months the S&P 500 gained at least 4 percent. Around 85 percent of the time, the index showed further gains, averaging 2.3 percent and 5.4 percent, respectively, for the one-month and three-month time periods.
| Dates: S&P 500
+4% Or More In 1 Month |
1 Month Change | What Happens In Following Month | What Happens In Following 3 Months |
|---|---|---|---|
| Source: Bloomberg | |||
| July 2013 | 4.9% | -- | -- |
| January 2013 | 5.0% | 1.1% | 6.6% |
| February 2012 | 4.1% | 3.1% | -4.1% |
| January 2012 | 4.4% | 4.1% | 6.5% |
| October 2011 | 10.8% | -0.5% | 4.7% |
| December 2010 | 6.5% | 2.3% | 5.4% |
| September 2010 | 8.8% | 3.7% | 10.2% |
| July 2010 | 6.9% | -4.7% | 7.4% |
| March 2010 | 5.9% | 1.5% | -11.9% |
| November 2009 | 5.7% | 1.8% | 0.8% |
| July 2009 | 7.4% | 3.4% | 4.9% |
| May 2009 | 5.3% | 0.0% | 11.0% |
| April 2009 | 9.4% | 5.3% | 13.1% |
| March 2009 | 8.5% | 9.4% | 15.2% |
| Post-2008 Probability of Positive Returns | 84.6% | 84.6% | |
| Post-2008 Average | 2.3% | 5.4% | |
| 1928-to-date Probability of Positive Returns | 65.1% | 64.7% | |
| 1928-to-date Average | 0.9% | 2.0% | |
The continued rally holds true even if you look farther back in history. Since 1928, which is the year containing the earliest available data from Bloomberg, there were 215 times when the index gained at least 4 percent in a month. Even then, about 65 percent of the time, stocks saw an increase. The one-month and three-month returns were 0.9 percent and 2.0 percent, respectively.
Analyzing historical market trends can help investors take advantage of market cycles, although keep in mind the past does not predict the future. It’s hard to simply brush off the prospective brightness, however, as jobless claims headed in the right direction and manufacturing data out of China, the U.K. and the U.S. were all better than expected this month.
With a forecast for sunny skies, make sure your portfolio is positioned to shine.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
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