The High Cost of Seasonal Superstition

• June through August is typically the best three-month calendar year stretch for stocks.

• The S&P 500 averages a 3.1% price return during that period.

• A similar outcome this year would see the stock market make new highs.

Don’t bet against a summer rally for stocks…

Each year around this time, I’m amazed at the same bad advice given to investors. The talking heads on CNBC and Bloomberg discuss the “May effect,” suggesting that individuals might be better off cashing out for the summer and then putting their money back to work once vacations have ended and kids are returning to school.

The saying originates from old England. Investors in London would sell their holdings ahead of summer vacations in the countryside. Given the time delay in information and their physical distance from the world’s financial capital, these individuals believed they’d be better off staying out of the market rather than risking losses. Upon returning to London in the fall, they would reinvest their assets until the following May.

This tradition has carried over to U.S. stocks for similar reasons. June through early September is when many money managers and investors take family vacations. The logic is simple—if your eyes are off the ball, don’t be heavily invested. That way, you don’t have to worry about losing money, and you can reinvest upon returning.

However, those who follow this logic overlook a fundamental principle of investing: It’s not about timing the market; it’s about time in the market!

For instance, consider the following chart from Yardeni Research. It shows the S&P 500 Index’s probability of posting gains versus losses for each month, dating back to 1928. Notably, the only month with greater than 50% odds of falling is September.

Think of it another way - over time, compounding interest via dividends and share buybacks tends to generate outsized gains. The S&P 500 has averaged a 9.5% total return (with dividends reinvested) since 1928. Based on historical data, we’re entering the best three-month stretch for gains.

But don’t take my word for it, let’s look at what the data’s telling us…

The S&P 500 is widely regarded as one of the best U.S. stock market benchmarks because it includes companies from diverse industries. The index began in the 1920s with 233 companies before adopting its current format in 1957.

With nearly a century of history, the index offers ample data for tracking trends. Over the years, certain seasonal patterns have become clear.

The chart below outlines the S&P 500’s monthly returns dating back to 1928. Yardeni Research analyzed individual monthly performance through 2026, tallying all outcomes and calculating the average return for each…

The most striking takeaway? Only three months tend to decline - two minimally and one significantly. More importantly, these down months present great opportunities to invest, as they typically bookend strong winning streaks.

Now, don’t get me wrong… months that usually see gains can experience declines, just as historically weak months can post positive returns. But over the past 95 years, market performance has exhibited consistent patterns.

At present, we’re in what’s typically one of the year’s worst months, but just on the other side lies the best three-month stretch in any calendar year. As seen in the table above, the S&P 500 typically averages a 3.2% gain during June, July, and August – close to half of its 7.9% annual return on a price-change basis.

Bottom line, decades of data demonstrate how this trend has repeated time and again. And based on historical performance, the S&P 500 should continue rallying in the months ahead. So, don’t be surprised if we see the stock market keep making new highs this summer.

Five Stories Moving the Market:

Iran's state media said about 30 ​vessels had crossed the Strait of Hormuz in the last day while the semi-official Fars ‌news agency claimed Iran had begun allowing transit for some Chinese vessels – Reuters. (Why you should care – that is notable increase in the number of vessels passing through the Strait)

U.S. President Donald Trump signaled China is willing to support negotiations with Iran, as he pushes for a diplomatic resolution to end the war and reopen the Strait of Hormuz – Bloomberg. (Why you should care – China is the biggest buyer of oil being shipped through the Strait of Hormuz)

Automaker Ford’s shares surged on investor hopes that its new energy unit will profit from the US data center boom; subsidiary Ford Energy launched as part of a pivot away from electric vehicles and towards providing battery storage capacity for Big Tech giants building AI data centers, deploying technology licensed from Chinese battery giant CATL – FT. (Why you should care – Wall Street thinks the unit could grow to be worth $10 billion and generate 25% gross margins) 

U.S. Trade Representative Jamieson Greer said he anticipates that China would commit to double-digit billions per year in American agricultural purchases, as Presidents Donald Trump and Xi Jinping complete their summit in Beijing – Bloomberg. (Why you should care – the U.S. and China struck a similar trade arrangement in Trump’s first term to end a trade standoff)

The U.S. has cleared around 10 Chinese firms to buy Nvidia's second-most powerful AI chip, the H200; U.S. officials said the Commerce Department has approved around 10 Chinese companies including Alibaba, Tencent, ByteDance, and JD.com to purchase the chips – Reuters. (Why you should care – Nvidia CEO Jensen Huang had previously estimated that China’s AI market had the potential to generate as much as $50 billion in revenue this year)

Economic Calendar:

Earnings: MLP, ORMP, RLX, SCOR

ECB – Economic Bulletin (4 a.m.)

U.S. – NY Empire State Manufacturing Index for May (8:30 a.m.)

U.S. – Industrial Production, Capacity Utilization for April (9:15 a.m.)

U.S. – Manufacturing Production for April (9:15 a.m.)

U.S. - Baker Hughes Rig Count (1 p.m.)

U.S. - CFTC’s Commitment of Traders Report (3:30 p.m.)

Fed Releases Balance Sheet Updates on Commercial Banks (4:15 p.m.)