Seasonal flows for the month of July

Following a volatile June marked by renewed trade tensions and geopolitical events, markets are now focusing on July seasonal trends, which historically show strong performance for US equities, with the S&P 500 averaging +3.44% over the past decade. Globally, other indices also typically see gains, while US Treasuries tend to flatten, and Forex markets remain muted. Commodities exhibit mixed trends, with Gold and Silver often strong, and Oil tending to correct. Cryptocurrencies like Bitcoin and ETH have historically posted significant July gains, though the reliability of these trends is increasingly debated given their exponential growth and evolving market dynamics.

Analysis

Following a volatile June marked by geopolitical tensions and renewed trade policy discussions, markets are now assessing strong seasonal trends for July. Historical data from the past decade indicates a particularly favorable environment for US equities, with the S&P 500, Nasdaq, and Dow Jones Industrial Average posting average monthly gains of 3.44%, 4.64%, and 3.00%, respectively. This performance typically outpaces other global indices. In fixed income, the US Treasury market tends to see a flattening yield curve, highlighted by the 30-Year Treasury bond having its best-performing month with an average gain of 1.30%. The foreign exchange market historically enters a period of lower volatility, with seasonal strength noted in the Japanese Yen and Euro, while the US Dollar tends to lag. Commodities exhibit a clear divergence; precious metals perform well, with Silver notably having its best month with a +4.68% average return, whereas Oil typically corrects, posting an average decline of -2.30% since 2015. While cryptocurrencies like Bitcoin and Ethereum have shown exceptionally strong average July returns above 10%, the reliability of this trend is explicitly questioned due to statistical anomalies from their exponential growth and evolving market participation.

Key Decisions for Investors

• Consider overweighting US equity exposure, as indices like the S&P 500 (SPY) and Nasdaq (QQQ) have historically shown their strongest seasonal performance in July.
• A potential relative value trade involves being long precious metals, particularly silver (SLV) which sees its best monthly performance, while remaining cautious on oil (USO) due to its negative seasonal trend, barring any new geopolitical flare-ups.
• In fixed income and forex, a strategy favoring long-duration U.S. Treasuries could be opportune given the 30-year bond's strong historical performance, while positions favoring the Euro (FXE) or Yen (FXY) over the U.S. Dollar (UUP) align with seasonal currency trends.
• Exercise caution with cryptocurrency positions; despite very strong historical July returns for Bitcoin (BITO) and Ethereum (EETH), their seasonal reliability is questionable due to the asset class's evolving nature and market structure.