Strong July Trends Could Face a Midterm-Year Test
July has historically been one of the market’s stronger months, and the latest data continues to support that view. The accompanying chart compares average July performance during the most recent 21 years (2005–2025) with July performance in midterm election years since 1950.
The solid lines, representing the recent 21-year period, show a remarkably consistent upward trend across all major indexes. NASDAQ has been the standout performer, advancing steadily throughout the month and finishing with an average gain of just over 3%. The S&P 500, DJIA, Russell 1000, and Russell 2000 also exhibit strong positive trends, with gains generally building as July progresses, but slowing shortly after mid-month.
Historically, the market’s strength tends to build from a solid first trading day. While there have been brief pauses and/or pullbacks after mid-month, the overall trajectory remains positive. This pattern likely reflects July’s reputation as a seasonally favorable month, often supported by improving investor sentiment in anticipation of second-quarter earnings reports.
However, the dashed lines on the chart tell a different story for midterm election years. While the DJIA and S&P 500 have still managed modest gains on average, performance has been notably weaker. Small-cap stocks, represented by the Russell 2000, have historically struggled the most during midterm Julys, often finishing the month in negative territory. NASDAQ and Russell 1000 have also experienced greater volatility and less consistent gains.
Seasonal trends suggest July could continue to provide support for equities, but the midterm-year backdrop serves as a reminder that volatility can emerge quickly and unexpectedly.
