The Stock Market Soared in May and June. History Says the S&P 500 Will Do This in July.
Key Points
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The S&P 500 has returned an average of 3.4% in the month of July during the last decade, second only to its average return of 4.2% in November.
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The S&P 500 returned over 20% in the two-month period that ended June 9, and that type of momentum has preceded substantial upside in the past.
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Tariffs imposed by President Trump are a substantial source of downside risk to the stock market because they are likely to raise prices and slow economic growth.
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The S&P 500 (SNPINDEX: ^GSPC) crashed when President Trump announced "Liberation Day" tariffs in early April, but the benchmark index has since staged a historic comeback. It advanced 6.2% in May to clinch its best performance during the month since 1990, and it climbed another 4.6% in June. Can the S&P 500 carry that momentum into July?
Image source: Getty Images. July has historically been one of the best months for the U.S. stock market
The S&P 500 is commonly regarded as the best barometer for the entire U.S. stock market due to its scope and diversity. The index includes 500 large U.S. companies that represent 80% of domestic equities by market value.
The S&P 500 has historically performed very well in July. In fact, it has been the second-best month for the U.S. stock market in recent years. Here is the S&P 500's average return by month during the last decade:
| Month | Average S&P 500 Return |
|---|---|
| January | 1.4% |
| February | (0.5%) |
| March | 0.2% |
| April | 1.1% |
| May | 1.5% |
| June | 1.8% |
| July | 3.4% |
| August | 0.1% |
| September | (2%) |
| October | 1.3% |
| November | 4.2% |
| December | (0.1%) |
Data source: YCharts. Table by author.
As shown, the S&P 500 has returned an average of 3.4% in July over the last decade, second only to its average return of 4.2% in November. Of course, past performance is never a guarantee of future results, but another stock market signal portends continued gains in the remaining months of 2025.
History says the S&P 500 can maintain its momentum beyond July, but tariffs add downside risk
The S&P 500 advanced 20.5% during the two-month period that ended on June 9. The index has only achieved a two-month return above 20% six times since its creation in 1957, and such events have always preceded more upward momentum.
Specifically, after a two-month return above 20%, the S&P 500 has returned an average of 16% over the next six months and 31% over the next year, according to Carson Investment Research. The S&P 500 closed at 6,006 on June 9, which means:
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The index will advance 16% to 6,967 by Dec. 9, 2025, if its performance matches the historical average. That implies 12.5% upside from its current level of 6,188.
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The index will advance 31% to 7,868 by June 9, 2026, if its performance matches the historical average. That implies 27.1% upside from its current level of 6,188.
Importantly, how the stock market actually performs in the remaining months of 2025 (and beyond) depends largely on earnings results, which are impacted by macroeconomic factors like inflation and gross domestic product (GDP). In that context, tariffs imposed by President Trump are a substantial source of downside risk for the stock market.
Most economists expect tariffs to increase prices and stunt economic growth, which would drag on consumer spending and business investments.
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The pre-tariff consensus from the Federal Reserve said inflation would drop to 2.5% by the fourth quarter of 2025, but post-tariff estimate puts inflation at 3% in the fourth quarter.
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The pre-tariff consensus from the International Monetary Fund said U.S. GDP would grow 2.7% in 2025, but the post-tariff estimate puts U.S. GDP growth at just 1.8% this year.
Consequently, many Wall Street analysts have cut earnings estimates. S&P 500 companies in aggregate are expected to report 8.5% earnings growth in 2025, but analysts had forecast 14% earnings growth before the Trump administration started implementing tariffs earlier this year, according to LSEG.
All this means July has typically been a strong month for the U.S. stock market, and history says the S&P 500 could soar in the remaining months of 2025, but tariffs are an unknown variable that could lead to a very different outcome.
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The Stock Market Soared in May and June. History Says the S&P 500 Will Do This in July. was originally published by The Motley Fool
