Wall Street Says "Sell in May." We Say "Buy in July" (2 Tickers on Our List)

The article argues for a “buy in July” setup, citing S&P 500 average gains of 2.3% over the 20 years through July 2024 and an RBC finding that the year after midterms has averaged a 14% S&P 500 rise. For stock picks, it highlights ITW with Q1 operating margins up 60 bps to 25.4%, revenue +5%, EPS +12%, and raised full-year guidance to $11.10–$11.50, while noting a 2.4% current dividend yield and a substantially higher yield-on-cost due to near-tripling dividends over a decade plus buybacks. It also flags Deere (DE) as benefiting from a projected 20% construction-equipment sales gain and 10%–12% operating-margin expansion in 2026, partially offset by a -14% Q1 decline in large-farm ag sales, with management indicating the ag cycle’s bottom is near.

Analysis

The real edge here is not the calendar story; it is the combination of defensive cash generation and self-funding capital return. ITW looks like a classic quality compounder where buybacks and dividend growth can absorb mediocre macro prints, but at a mid-20s multiple the stock still needs either sustained margin expansion or a re-rating to beat the market. If industrial activity rolls over, this can drift rather than crash, which is why it is better viewed as a relative-value long versus lower-quality cyclicals than as a high-conviction beta call.

DE is a more interesting second-order trade because the construction franchise can offset a lagging farm cycle while lower energy and interest costs eventually improve dealer inventory turns and replacement demand. The market may be underappreciating how quickly used-equipment values and dealer order books can improve once grain prices stabilize for a few months, but that is a months-not-days process. The downside is that if commodity prices soften again or rates stay restrictive, ag capex can remain frozen into next year despite better headlines.

The contrarian point is that seasonality is a weak signal if growth data deteriorate; a strong July does not matter much if earnings revisions turn down in August/September. For ITW, the thesis breaks if margin gains stall or the guidance cadence stops improving; for DE, it breaks if corn/wheat fail to hold recent support and management is forced to cut ag expectations again. In both names, the post-midterm setup is too far out to trade directly today; the near-term catalyst is simply whether the next two prints confirm that the market is rewarding quality over cyclical hope.

Key Decisions for Investors

• Buy ITW on a 2-4% pullback from current levels; target low-double-digit upside over 3-6 months if margins and guidance remain stable, with a thesis break on any margin compression or guide-down.
• Initiate a starter long DE only after confirmation that grain prices hold recent support for 4-6 weeks; if confirmed, expect 10-15% upside over 6-12 months as construction strength offsets the farm trough.
• Relative-value pair: long DE / short AGCO over the next 1-3 months to express the view that DE's construction mix and balance sheet provide better downside protection if ag demand stays soft.
• Do not chase the broad seasonality narrative with index exposure; use it only as a timing overlay. If the next CPI/PCE prints reaccelerate or rates back up, fade the dividend-growth trade and reduce exposure.