July’s Been Good to Us Before
Look, I’m not one to bet the farm on seasonal patterns, but July has been surprisingly consistent. Over the past 15 years, the S&P has averaged 3.0% gains in July (Or 2.81% if you want to include the one day of trading so far in 2025). More interesting? We haven’t seen a down July in ten straight years. That’s not nothing. The last ten years have included pandemics and the presidencies of both Democratic and Republican presidents.
The seasonal pattern of the Volatility Index (VIX) backs up the pattern of the S&P 500. The real action tends to happen late in the month when the momentum crowd and index funds start doing their thing.
But July hasn’t always been so smooth. Yes, the average for the VIX has been -1.18% return (meaning volatility decreases as the market increases), but there have been plenty of volatile Julys over the last 15 years or so, with the VIX spiking as much as 52%.
However, if you refer back to the earlier chart, examining the average S&P 500 returns in July, you can see that even in 2011, when the VIX increased by 52%, the S&P 500 was only down 2%.
The Fed’s Still Playing Coy
Here’s where it gets interesting. Powell’s crew is still penciling in 50 basis points of cuts this year, but the market’s not exactly holding its breath for July. CME’s FedWatch tool shows just 21% odds of a cut this month.
September looks much better, though, with a 91% chance of the Fed dropping interest rates.
If Powell does pivot more dovish, though? That could be the catalyst that pushes us through these recent highs. Yield-sensitive sectors have been waiting for their moment.
Earnings Season + Tariff Drama
We’re also kicking off Q2 earnings season with analysts expecting 5.7% profit growth year-over-year. The guidance has been pretty conservative so far, which usually sets us up nicely for some positive surprises.
But here’s the wild card: that 90-day tariff truce from April expires around July 8th or 9th. Markets are basically betting that cooler heads will prevail—either with last-minute deals or another extension. If that goes sideways, well, that’s a different conversation entirely.
The Bottom Line
After the V-shaped recovery we just saw, plus July’s seasonal tailwinds and the potential for Fed relief, the bulls have a decent setup here. I’m watching for any dip due to profit-taking, but don’t be surprised if we push higher into August.
That said, keep your eyes on the Fed commentary and any trade headlines. This market has shown it can move fast in either direction, and July has historically been good to us, but nothing is guaranteed in this game.
What’s your take? Are you positioned for more upside or playing it cautious heading into earnings season?
