Ok enough already. This heat wave pre-July is way out of control! We have been breaking higher temps left and right, and the stock market is reaching all-time highs. It all seems a little early, doesn't it? Temperature wise, I usually consider July to be the hottest month of the year here in the Mid-Atlantic. But July is also a traditional great month for stocks.

You can see the numbers below. July has been positive 75% of time since 2004.

Both charts above courtesy of https://tradethatswing.com/seasonal-patterns-of-the-stock-market/

But given our recent heat wave and high stock markets in June, I have to ask, will we get even hotter and higher in July, or will both temperatures and the stock market cool off a bit?

As the Chief Investment Officer of Members’ Wealth, I've been keeping a close eye on market despite the outside heat. In one regard, thanks to stock market appreciation, client portfolios have seen their weighting in stocks naturally increase throughout the year. This causes us to consider rebalancing. However, the stock market often performs well in July due to a combination of seasonal factors and investor behaviors. So, continuing to ride the recent momentum while also using July strength to trim some winners might be appropriate.

Let's dive into some reasons why July is typically a hot month for stocks:

1. End of Quarter Adjustments: At the end of June, fund managers often rebalance their portfolios. This activity can create buying pressure in early July as they make adjustments for the new quarter. It's like a fresh start, and everyone wants to position themselves for success.
2. Historical Trends: Historically, July has been a strong month for the stock market. This pattern can become self-reinforcing as investors anticipate higher returns and buy stocks in anticipation (or at least don’t sell). It's a cycle of positive reinforcement that keeps the momentum going.
3. Summer Rally: The summer months, including July, can sometimes see a 'summer rally' where stocks perform well due to lower trading volumes and positive sentiment. With many people on vacation, the market can move more smoothly and steadily upward. “Why sell and pay taxes, as I just get wealthier sitting on the beach and letting my portfolio drift higher.”

These, along with other factors, combined, have historically led to positive stock market performance in July, although it's important to note that market conditions can vary from year to year. But with the current heat wave and market highs, we could be in for an even hotter July.

As always, our team at Members' Wealth is here to help you navigate these blazing markets and try to seize the opportunities (which may include rebalancing) that come your way. Stay cool and invest wisely!

The information published herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions. Estimates of future performance are based on assumptions that may not be realized. Past performance is not necessarily indicative of future returns or results. No representation is made as to the accuracy, completeness or timeliness of the information in this material since certain information herein is based on or derived from information provided by independent third-party sources. There is no duty to update this information. Illustrations provided are for presentation purposes only. Actual investment experience will vary with stock selection and changing market conditions. Investment advisory services offered through Member's Wealth, LLC, a registered investment advisor. The Dow Jones Industrial Average (DJIA) is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The S&P 500 index is designed to be a broad based unmanaged leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe or representative of the equity market in general. The National Association of Securities Dealers Automated Quotations (NASDAQ) is an American stock market that handles electronic securities trading around the world. The Russell 2000 index is an index measuring the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States. Visit www.russell.com/indexes/ for more information regarding Russell indices. The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Bloomberg US Aggregate Bond Index, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.

About the Author – Dane Czaplicki, CFA®

Dane Czaplicki is CEO of Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of wealth management experience, Dane and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations. He believes everyone needs sound financial advice from someone whose interests are aligned with theirs, and is determined to put service before all else.

Dane received his MBA from The Wharton School of Business at the University of Pennsylvania and his bachelor’s degree from Bloomsburg University. Outside work, he enjoys spending time with his wife and kids, hiking and camping, reading, running, and playing with his dog. To learn more about Dane, connect with him on LinkedIn.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

You can learn more about how we serve our clients by tapping the button below.

Investment advisory services are offered through Members’ Wealth, LLC., a Registered Investment Advisory Firm.

Registration with the SEC does not imply a certain level of skill or training. We are an independent advisory firm helping individuals achieve their financial needs and goals

Members’ Wealth does not provide legal, accounting or tax advice. Please consult your tax or legal advisors before taking any action that may have tax consequences.

This commentary reflects the personal opinions, viewpoints and analyses of the Members’ Wealth, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Members’ Wealth, LLC or performance returns of any Members’ Wealth, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Members’ Wealth, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results

Copyright © 2023 Members' Wealth LLC