A look at summer market prospects: Between strong historical trends and new risks on the horizon.
This old Wall Street saying tends to resurface around Memorial Day, suggesting investors reduce their exposure to stocks during a seasonally weaker period. But history doesn’t fully support that view. Over the past decade, the S&P 500 has averaged a +3.9% gain between Memorial Day (May 26) and Labor Day (September 1), closing higher 80% of the time.
Still, summer isn’t without risks. Trade tensions, downward revisions to earnings estimates, and a recent rise in interest rates could weigh on investor sentiment. For example:
Tariff effects may catch up: While the economy has shown resilience, growth is expected to slow in the second half of the year as tariffs begin to more noticeably impact consumer spending and business investment.
Corporate earnings outlook: Q1 2025 surprised to the upside. However, many earnings reports still don’t fully reflect the new trade environment. Full-year EPS estimates have started to come down, though they remain relatively optimistic, projecting +10% annual growth.
Rising long-term rates: With the 10-year Treasury yield now above 4.5%, valuation pressures are building – especially in interest-rate-sensitive sectors like real estate.
Market implications:
While history suggests summer can be a constructive period for markets, current conditions make it harder to rule out potential volatility.
On average, the S&P 500 has seen a drawdown of roughly 7% at some point between May and September over the past decade.
Sell in May and go away?
A look at summer market prospects: Between strong historical trends and new risks on the horizon.
This old Wall Street saying tends to resurface around Memorial Day, suggesting investors reduce their exposure to stocks during a seasonally weaker period. But history doesn’t fully support that view. Over the past decade, the S&P 500 has averaged a +3.9% gain between Memorial Day (May 26) and Labor Day (September 1), closing higher 80% of the time.
Still, summer isn’t without risks. Trade tensions, downward revisions to earnings estimates, and a recent rise in interest rates could weigh on investor sentiment. For example:
Market implications:
While history suggests summer can be a constructive period for markets, current conditions make it harder to rule out potential volatility.
On average, the S&P 500 has seen a drawdown of roughly 7% at some point between May and September over the past decade.
Source: Raymond James