July's Midterm-Year Pattern Continues to Offer a Constructive Roadmap
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.
While no seasonal pattern is guaranteed to repeat, July's historical midterm-year tendency remains constructive. If the major averages continue to track their long-term midterm-year script, the market appears to still have room to advance before the calendar turns to the more challenging seasonal period that typically arrives later in the third quarter, usually in August and September.
