July has been a decent month for the S&P 500 over
the last twenty-five years. We all know
about the “Go Away In May” theory so it is not shocking to see that the returns
are not as robust as some other months throughout the calendar year. Nevertheless, after removing the high and low
returns for statistical analysis I have found the S&P 500 TR has achieved a
mean return of .96% for the month of July over the last twenty-five years. The positive mean continues for the trailing
twenty year period, before slipping into negative territory for the trailing
fifteen year period. Good returns have
returned over the last decade for the markets in July as the S&P 500 TR
finished the trailing ten years with a mean return of 1.02%.
The market’s returns in July for the trailing 25, 20, 15 and
10 year time periods, seems to be driven by financials, real estate,
industrials and consumer staple stocks.
Each of these sectors achieved a positive mean return for every time
period examined and finished as top half performers versus the other sectors
and the S&P 500 TR for every time period.
The technology sector, which has been a notorious summer time laggard,
has clearly been the weakest sector during the month of July over the last
twenty-five years. Other weak sectors to
note have been the utilities and consumer discretionary sectors.
Based on the historical returns and what I feel is taking
place in the current markets, I have to believe that financials and industrials
are in a real sweet spot for the month of July.
The reasons are as follows:
1)
July has been a very strong month for both financials
and industrials
2)
The markets have been showing signs of shifting
from defensive sectors (utilities) to
more cyclical sectors (financials and industrials)
3)
With the prospect (or should I say fear) of
rising interest rates, this is good news for financials
Perhaps the expected move to cyclical stocks will also help
the help the technology sector buck its historically weak trend in July. I will not invest against the data. My AFL Cyclical Sector Folio is the one
portfolio I manage purely based on historical data. Therefore, I will be allocating the portfolio
evenly across the following ETFs: Financial Select SPDR (XLF), iShares Cohen
& Steers Realty Majors (ICF), Industrial Select Sector SPDR (XLI) and
Consumer Staples Select Sector SPDR (XLP).
|
July
|
Cons Disc
|
Health Care
|
Energy
|
Financials
|
Cons Staples
|
Technology
|
|
1988
|
-0.05%
|
-0.09%
|
0.45%
|
0.37%
|
0.71%
|
-4.81%
|
|
1989
|
8.49%
|
11.36%
|
5.41%
|
6.30%
|
9.54%
|
5.16%
|
|
1990
|
-3.02%
|
0.89%
|
6.97%
|
-5.24%
|
-0.04%
|
-5.41%
|
|
1991
|
5.36%
|
7.50%
|
5.00%
|
6.32%
|
4.19%
|
7.77%
|
|
1992
|
2.51%
|
5.37%
|
4.73%
|
3.28%
|
3.86%
|
3.51%
|
|
1993
|
1.52%
|
-2.46%
|
-1.76%
|
1.95%
|
-1.24%
|
-1.06%
|
|
1994
|
3.06%
|
2.47%
|
1.34%
|
1.92%
|
3.36%
|
3.26%
|
|
1995
|
5.77%
|
6.83%
|
2.57%
|
4.81%
|
1.10%
|
9.06%
|
|
1996
|
-8.82%
|
-8.81%
|
-4.82%
|
-1.20%
|
-1.36%
|
-8.86%
|
|
1997
|
5.89%
|
3.01%
|
7.67%
|
9.61%
|
3.52%
|
12.66%
|
|
1998
|
-2.10%
|
-1.72%
|
-12.79%
|
-1.09%
|
-3.88%
|
-1.14%
|
|
1999
|
-3.59%
|
0.95%
|
2.75%
|
-4.17%
|
-2.34%
|
-1.21%
|
|
2000
|
-1.94%
|
-2.46%
|
-5.16%
|
6.87%
|
-1.54%
|
-4.56%
|
|
2001
|
-1.53%
|
-2.84%
|
-3.48%
|
-0.82%
|
1.00%
|
-9.13%
|
|
2002
|
-9.73%
|
-3.45%
|
-14.63%
|
-8.05%
|
-6.45%
|
-10.69%
|
|
2003
|
2.44%
|
3.14%
|
-3.87%
|
4.00%
|
0.40%
|
5.73%
|
|
2004
|
-5.19%
|
-7.11%
|
2.54%
|
-2.45%
|
-5.97%
|
-11.31%
|
|
2005
|
3.72%
|
5.54%
|
9.20%
|
2.71%
|
3.61%
|
6.29%
|
|
2006
|
-4.44%
|
1.94%
|
-0.46%
|
0.80%
|
1.72%
|
-5.18%
|
|
2007
|
-4.89%
|
-2.78%
|
-0.39%
|
-6.72%
|
-2.23%
|
-0.68%
|
|
2008
|
-0.18%
|
6.54%
|
-15.75%
|
4.84%
|
2.26%
|
-1.92%
|
|
2009
|
8.34%
|
6.04%
|
7.01%
|
9.44%
|
8.39%
|
8.71%
|
|
2010
|
7.31%
|
2.18%
|
8.96%
|
7.31%
|
7.77%
|
7.00%
|
|
2011
|
-1.26%
|
-3.16%
|
0.68%
|
-3.10%
|
-1.33%
|
-2.63%
|
|
2012
|
-0.49%
|
0.25%
|
3.34%
|
-0.15%
|
1.51%
|
-0.88%
|
|
# of Up Years
|
11
|
15
|
15
|
15
|
15
|
10
|
|
Mean
|
0.37%
|
1.16%
|
0.52%
|
1.56%
|
1.02%
|
-0.07%
|
|
Standard Deviation
|
4.36
|
3.90
|
5.90
|
4.23
|
3.35
|
5.83
|
|
Trailing 5 Yr Mean
|
2.21%
|
2.82%
|
3.68%
|
4.00%
|
3.85%
|
1.40%
|
|
Trailing 10 Yr Mean
|
0.28%
|
1.64%
|
2.23%
|
1.75%
|
1.71%
|
0.97%
|
|
Trailing 15 Yr Mean
|
-0.93%
|
0.28%
|
-1.19%
|
0.62%
|
0.08%
|
-1.46%
|
|
Trailing 20 Yr Mean
|
-0.26%
|
0.34%
|
-0.58%
|
1.39%
|
0.35%
|
-0.44%
|
|
July
|
Telecom
|
Nat Resources
|
Real Estate
|
Utilities
|
Industrials
|
S&P 500 TR
|
|
1988
|
-0.53%
|
-0.58%
|
-0.02%
|
-0.69%
|
-2.87%
|
-0.38%
|
|
1989
|
7.74%
|
5.88%
|
3.43%
|
5.28%
|
6.50%
|
6.45%
|
|
1990
|
-3.95%
|
5.46%
|
0.66%
|
0.52%
|
-2.31%
|
-0.32%
|
|
1991
|
4.95%
|
4.43%
|
0.95%
|
3.17%
|
3.58%
|
4.66%
|
|
1992
|
3.65%
|
3.56%
|
2.46%
|
5.23%
|
1.41%
|
4.09%
|
|
1993
|
2.24%
|
-0.42%
|
1.95%
|
1.64%
|
2.24%
|
-0.40%
|
|
1994
|
4.70%
|
2.89%
|
-0.68%
|
3.36%
|
3.70%
|
3.28%
|
|
1995
|
6.34%
|
2.93%
|
1.99%
|
1.59%
|
6.72%
|
3.32%
|
|
1996
|
-7.07%
|
-4.23%
|
-0.22%
|
-4.61%
|
-8.91%
|
-4.42%
|
|
1997
|
4.81%
|
5.33%
|
4.09%
|
2.73%
|
6.94%
|
7.96%
|
|
1998
|
0.79%
|
-10.66%
|
-6.13%
|
-1.26%
|
-5.09%
|
-1.06%
|
|
1999
|
-1.15%
|
1.80%
|
-3.69%
|
-0.32%
|
-2.03%
|
-3.12%
|
|
2000
|
-4.56%
|
-4.30%
|
7.78%
|
-0.54%
|
5.18%
|
-1.56%
|
|
2001
|
-4.16%
|
-3.02%
|
-1.49%
|
-3.28%
|
1.28%
|
-0.98%
|
|
2002
|
-9.16%
|
-12.20%
|
-5.15%
|
-11.12%
|
-10.86%
|
-7.80%
|
|
2003
|
0.97%
|
-1.92%
|
4.80%
|
-4.10%
|
4.83%
|
1.76%
|
|
2004
|
-5.46%
|
2.64%
|
0.65%
|
0.80%
|
-3.64%
|
-3.31%
|
|
2005
|
6.12%
|
7.44%
|
6.54%
|
3.18%
|
7.27%
|
3.72%
|
|
2006
|
-2.07%
|
0.30%
|
2.77%
|
3.91%
|
-7.48%
|
0.62%
|
|
2007
|
-1.02%
|
0.26%
|
-7.05%
|
-3.57%
|
-0.80%
|
-3.10%
|
|
2008
|
-2.10%
|
-13.26%
|
2.07%
|
-6.64%
|
3.47%
|
-0.84%
|
|
2009
|
5.93%
|
6.90%
|
10.00%
|
4.97%
|
10.76%
|
7.56%
|
|
2010
|
10.00%
|
8.38%
|
9.37%
|
7.48%
|
11.02%
|
7.01%
|
|
2011
|
-4.86%
|
0.50%
|
1.17%
|
-1.41%
|
-6.97%
|
-2.03%
|
|
2012
|
3.41%
|
1.77%
|
1.86%
|
2.29%
|
-0.45%
|
1.04%
|
|
# of Up Years
|
13
|
16
|
17
|
14
|
15
|
12
|
|
Mean
|
0.64%
|
0.64%
|
1.53%
|
0.53%
|
1.01%
|
0.96%
|
|
Standard Deviation
|
4.34
|
4.94
|
3.62
|
3.29
|
5.19
|
3.39
|
|
Trailing 5 Yr Mean
|
2.41%
|
3.06%
|
4.43%
|
1.95%
|
4.59%
|
2.40%
|
|
Trailing 10 Yr Mean
|
0.80%
|
2.24%
|
3.65%
|
0.76%
|
1.81%
|
1.02%
|
|
Trailing 15 Yr Mean
|
-0.63%
|
-0.81%
|
1.58%
|
-0.46%
|
0.49%
|
-0.14%
|
|
Trailing 20 Yr Mean
|
0.16%
|
-0.22%
|
1.54%
|
-0.07%
|
0.95%
|
0.42%
|
|
25 Year
|
20 Year
|
15 Year
|
10 Year
|
5 Year
|
|
|
1
|
Financials
|
Real Estate
|
Real Estate
|
Real Estate
|
Industrials
|
|
2
|
Real Estate
|
Financials
|
Financials
|
Nat Resources
|
Real Estate
|
|
3
|
Health Care
|
Industrials
|
Industrials
|
Energy
|
Financials
|
|
4
|
Cons Staples
|
S&P 500 TR
|
Health Care
|
Industrials
|
Cons Staples
|
|
5
|
Industrials
|
Cons Staples
|
Cons Staples
|
Financials
|
Energy
|
|
6
|
S&P 500 TR
|
Health Care
|
S&P 500 TR
|
Cons Staples
|
Nat Resources
|
|
7
|
Telecom
|
Telecom
|
Utilities
|
Health
Care
|
Health
Care
|
|
8
|
Nat Resources
|
Utilities
|
Telecom
|
S&P
500 TR
|
Telecom
|
|
9
|
Utilities
|
Nat Resources
|
Nat Resources
|
Technology
|
S&P
500 TR
|
|
10
|
Energy
|
Consum Disc
|
Consum Disc
|
Telecom
|
Cons
Disc
|
|
11
|
Cons
Discr
|
Technology
|
Energy
|
Utilities
|
Utilities
|
|
12
|
Technology
|
Energy
|
Technology
|
Cons
Disc
|
Technology
|
Jon R. Orcutt is the founder of Allocation For Life, Author of The Allocation For Life Investment Newsletter, Author of "Master The Markets With Mutual Funds: A Common Sense Guide To Investing Success" and manager/creator of the AFL Models available to Allocation For Life subscribers at Folio Investing.
