The S&P 500 generally takes one particular direction during the month of July.
The market just wrapped up a sensational first half, with the S&P 500 (^GSPC 0.54%) and the Nasdaq climbing more than 14% and 18%, respectively. The S&P 500 confirmed a new bull market earlier in the year when it reached a record high and then went on to hit additional new highs as the months progressed.
Growth stocks, especially those involved in the hot area of artificial intelligence (AI), led gains, contributing a great deal to the advance. Nvidia, Microsoft, Alphabet, and Amazon made up more than half of the S&P 500’s first-half gain, according to J.P. Morgan Wealth Management.
Now the question is whether you should buy stocks in July, right at the start of this second half of the year. Is it a good idea to dive in now, or should you wait for the next wave of earnings reports and more economic data later in the year? Let’s find out.
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July performance throughout history
A great way to get started is by looking at what history has to say about the stock market in July. Since 1928, July has proven itself to be the best month in terms of stock performance, according to MarketWatch, citing Dow Jones Market Data.
The average S&P 500 increase has been 1.7%, and the data show that the index rose in July more than 60% of the time. This implies that if you invest early in July, you’re likely to benefit in the weeks that follow — and this may especially be the case if you invest in an S&P 500 index fund, an asset that tracks the movement of the index.
So, if history is a guide, buying in early July could pave the way to near-term rewards. And considering AI growth still has far to go, technology stocks could continue to roar higher in the weeks to come.
This is positive and suggests you should buy now, but there are two things to keep in mind. First, history is sometimes wrong. Just because a particular pattern has taken place over time doesn’t mean it’s set in stone. There have been occasions when the market has declined in July—and that could happen this year or any other year in the future.
Second (and this may be the most important point of all), in investing, it’s easy to get caught up in the short term — following the latest trend or celebrating a stock that’s skyrocketed. A short-term win is fine; it could boost your portfolio from time to time, and a short-term success story could turn into a long-term success story, too. (For example, Super Micro Computer has soared nearly 200% this year — but the company has built a solid business and increased earnings over time, and future AI demand could keep momentum and the share price climbing.)
A focus on the long term
But a focus on the long term is what truly brings investment success, and certain stocks like Super Micro that have done well in the short term can fit into this strategy, too. You’re much more likely to build wealth by buying quality companies and holding on for a number of years than by buying just during a “good” month and then locking in gains a few weeks later.
This is actually fantastic news because it means you don’t have to worry about when to invest and whether that particular week or month will be a positive one. Instead, you’ll buy for the long term, so it won’t matter whether stocks rise or fall in July — whatever direction they take in the next few weeks generally won’t impact your returns by much if you hold on for at least five years.
What to do in July
Does this mean you shouldn’t buy in July? Not necessarily. If you have the funds to invest and have spotted some quality players to add to your portfolio, or if you’re new to the game and want to get started, there’s no reason to wait. Since investing isn’t about timing the market or waiting to get in before or after earnings reports and economic data, now is a great time to buy stocks as long as those particular stocks are trading at reasonable valuations.
If history is right, and July turns out to be a winning month, wonderful. But even if the market or your favorite stocks stumble, don’t worry. If you’ve chosen a diverse group of strong companies, you could still score a major victory over time.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.