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As the market pushes through July, traders and investors should be mindful that history suggests the calendar becomes considerably less forgiving. Since 1990, August and September have consistently ranked among the weakest months of the year for U.S. equities, a pattern that has earned the nickname "Summer Retreat."

The historical averages tell the story. August has produced average declines in both the Dow Jones Industrial Average and the S&P 500, while NASDAQ has managed only a marginal gain. September has been even more challenging, with all three major indexes posting average losses over the past three-and-a-half decades. Among them, DJIA has historically fared the worst, while the S&P 500 and NASDAQ have also struggled to generate positive returns.

Strong bull markets can overcome historical tendencies, and unexpected economic or geopolitical developments can quickly change the market's direction. However, these recurring patterns serve as a valuable reminder that risk has historically increased as summer draws to a close.

With earnings season winding down and investors shifting their attention toward Federal Reserve policy, inflation data, and the return of institutional trading activity after Labor Day, volatility often increases during this period. That combination of weaker historical performance and renewed market participation makes August and September months that deserve heightened vigilance.

July monthly option expiration has a reputation for producing choppy trading, and the historical data since 1990 largely supports that view. While expiration-related positioning by institutional investors and market makers can create elevated volatility, the impact has varied depending on whether investors focus on expiration day, the entire expiration week, or the week that follows.

Monthly expiration Friday has historically been the weakest period. DJIA and S&P 500 have each averaged a –0.35% decline on July monthly option expiration day, while NASDAQ has fared even worse with an average loss of –0.44%. All three indexes have finished lower roughly two-thirds of the time, suggesting traders might want to be prepared for some short-term weakness heading into expiration day.

Looking beyond Friday, the picture is generally more balanced. During July monthly option expiration week, DJIA has posted the strongest historical results, averaging a +0.38% gain with advances in 58.3% of all years since 1990. S&P 500 has been essentially flat (–0.04%), while NASDAQ has remained slightly negative (–0.13%), reflecting the technology sector's tendency toward greater volatility.

The week after monthly expiration has historically improved modestly. DJIA has averaged a +0.15% gain, S&P 500 has added +0.09% on average, and even NASDAQ, despite a slightly negative average return (–0.17%), has actually advanced in 52.8% of the years reviewed. This suggests that although a handful of outsized declines weigh on the NASDAQ's average, the market has more often than not found some stability after July monthly expiration.

July monthly option expiration can temporarily pressure the market, but any weakness has often proven short-lived as traders and investors quickly refocus on earnings season and broader market fundamentals.

With the first several trading days of July now in the books, 2026 appears to be tracking the historical midterm-year patterns. DJIA had posted an above average start to the month until today, while the S&P 500 has generally followed its typical midterm trajectory. The NASDAQ has been somewhat softer than its historical pattern, and small caps, represented by Russell 2000, have lagged noticeably.

Historically, July has been one of the more favorable months of the year during midterm election cycles, particularly for the Dow and S&P 500. The seasonal tendency has been for gains to build through the middle and latter portions of the month, even if short-term volatility creates occasional pullbacks along the way. That remains the roadmap suggested by the long-term data.

The biggest divergence continues to be beneath the surface. NASDAQ has been somewhat softer than its historical midterm pattern, while Russell 2000 remains well below its seasonal average. That isn't entirely surprising. Small caps have historically been the weakest performers during July in midterm election years, and lingering concerns over inflation, interest rates, economic growth, and the Iran war continue to encourage traders and investors to favor larger, more established companies.

Following a negative Q1, the S&P 500's track record for the rest of the year is mixed. But when the market rebounds by more than 10% in the second quarter, the historical picture changes dramatically.

In the six prior occurrences since 1950 — 1968, 1980, 2003, 2009, 2020, and 2025 — the S&P 500 finished higher in Q3, Q4, the second half, and the full year. That's a perfect 6-for-6 record.

It's a small sample, but the magnitude of the Q2 rebound appears to matter. A modest bounce after a weak first quarter has offered little historical insight. But a double-digit second-quarter surge following a meaningful Q1 decline—like the one we've just experienced—has historically been associated with continued market strength through year-end.

The first trading day of July has historically delivered a remarkably consistent bullish edge for traders and investors. As the accompanying data illustrates, all three major U.S. market indexes have posted impressive gains on the opening session of the month over the last two decades.

Since 2005, the S&P 500 has advanced on the first trading day of July in 19 of the past 21 years, an outstanding 90.5% success rate with an average gain of 0.48%. DJIA and NASDAQ have also been strong, each rising 18 times in 21 years (85.7%), with average gains of 0.44% and 0.54%, respectively.

This seasonal tendency is not surprising. July has historically been one of the market's stronger months as the new quarter begins, retirement contributions continue to flow into equities, institutional investors reposition portfolios, and second-quarter earnings expectations begin to take shape. The consistency of this early-July strength suggests traders and investors should remain alert for another constructive start to the month.

The few exceptions—such as 2010, 2017 for the NASDAQ, and 2025—serve as reminders that seasonality should never be used in isolation. Market fundamentals, monetary policy, economic data, and geopolitical developments all remain important drivers of price action.

Trading ahead of the July 4th Independence Day holiday has historically been stronger than the days after. Volume thins on both sides as vacations start early and finish late, but the bulls run before the 4th, not after.

This has become more pronounced since 2011. Three days before Independence Day, DJIA has advanced in 14 of the last 15 years — up 93.3% of the time, averaging +0.62%. S&P 500 is higher 80.0% of the time (+0.58%), Russell 2000 73.3% (+0.64%), and NASDAQ 66.7% (+0.62%). The strength carries right into the holiday: over those same fifteen years the day before the 4th has closed higher 80.0% of the time for DJIA and NASDAQ and 86.7% for S&P 500 and Russell 2000.