June has historically been a bland month for the stock market; however, using seasonal analysis may help add some spice to portfolios in an otherwise lackluster time period for U.S. equities.
On balance, June can be a hit-or-miss month for equity returns, with a slightly higher trend to the upside. On average, the S&P 500 Index has lost 0.5% in June over the past 20 years, though history has shown that stocks have moved higher 55% of the time over the same period. And when June has generated positive returns for the S&P 500, the average magnitude move higher for the month has been 1.9%; when negative, the average return has been -3.4%.
Considering the potential for modest-to-lower returns on the index, our seasonal analysis in the LPL Chart of the Day highlights specific sectors and industry groups that could be poised to outperform the broad index in June and potentially add spice to the overall portfolio strategy if suitable investors. Importantly, nonseasonal factors still influence performance and should not be ignored.
As the LPL Chart of the Day above shows, a variety of sectors have on average tended to exhibit relative strength during June, with the healthcare, energy, telecommunication services, and information technology sectors exhibiting the strongest returns. However, if you are interested in a more targeted strategy, you may consider industry-level investments like the healthcare equipment and services, pharmaceuticals, and biotechnology and life sciences groups, which have posted the highest average relative returns with a greater frequency of outperformance; or the software & services industry group, which has significantly outperformed the index in June over the past 20 years.
One way to potentially help mitigate the effects of a historically bland period for stocks, and add some spice to your portfolio, is by incorporating seasonal statistics as part of your overall investment management process. Stay tuned for future seasonal analysis updates on the LPL Research blog.