Will There Be A June Swoon? Maybe, But Maybe Not

Posted by Ryan Detrick, CMT, Chief Market Strategist

Tuesday, May 31, 2022

After a late month rally, we can say goodbye to the month of May, which now opens the door to June. Here’s the bad news, June is historically a weak month and it is actually the worst month of the year during a midterm year, down 1.8% on average.

View enlarged chart.

As shown in the LPL Chart of the Day, the good news though is the past 10 years, it has been a solid month, up 1.4% on average to rank as the fourth best month. But the past 20 years it has been weak (only September has been worse) and since 1950 only August, February, and September were worse.

View enlarged chart.

“June has something for everyone, as it is no doubt a very weak month historically, but the past decade it has been strong,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Still, after the big bounce in late May, we wouldn’t be surprised at all if this recent strength continued into a potential summer rally.”

Here are three reasons for optimism. First, after the huge gains last week, the 7 week losing streak for the S&P 500 Index is finally over. There had been only three prior 7 week losing streaks and twice (1970 and 1980) saw the S&P 500 up more than 33% a year later. On the other side though, the returns in 2001 weren’t very good as 9/11 and the recession hurt returns.

View enlarged chart.

Second, the S&P 500 corrected 18.7% before the rally last week, which could be a good thing as looking at previous corrections between 10-20% showed gains of nearly 25% on average a year later and nearly 40% two years later.

View enlarged chart.

Lastly, huge gains like the 6.6% gain for the S&P 500 last week are usually a great sign for the bulls. Here are all the times it has gained more than 6% in a week (since 1950) and the future returns are very strong. Up 12.5% on average six months later and nearly 22% a year later on average is something that could have most bulls smiling after the rough start to 2022.

View enlarged chart.

2022 has been a rough year for most investors, but we do see better times ahead. Last week’s bottom and rally could be the start of brighter skies ahead for investors.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. For more information on the risks associated with the strategies and product types discussed please visit https://lplresearch.com/Risks 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Securities and advisory services offered through LPL Financial, a registered investment advisor and broker-dealer. Member FINRA/SIPC.

View All Posts