The first five months of 2022 haven't been kind to the SPDR S&P 500 ETF Trust (NYSE:SPY). Unfortunately, the month of June hasn't historically been a strong month for stock prices, but LPL Financial Chief Market Strategist Ryan Detrick said this week that there's reason for optimism that investors can avoid a June swoon.
Not only has June historically been a weak month for the S&P 500, Detrick said it has actually been the worst month of the year in midterm U.S. election years like 2022.
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Fortunately, Detrick said June has been far kinder to investors in recent history.
“June has something for everyone, as it is no doubt a very weak month historically, but the past decade it has been strong,” Detrick said. “Still, after the big bounce in late May, we wouldn’t be surprised at all if this recent strength continued into a potential summer rally.”
Reasons For Optimism: Detrick listed at least three reasons for investors to be optimistic about stocks heading into June:
The S&P 500 just snapped a seven-week losing streak in the last week of May. Detrick said the past three times the S&P 500 traded lower during seven consecutive weeks, it averaged a 33% return over the next 12 months.
The S&P 500 was down 18.7% from its highs before last week's rally. The S&P 500 has historically averaged 12-month returns of nearly 25% following similar corrections of between 10% and 20%.
Finally, Detrick said big rallies like the 6.6% gain in the S&P 500 last week have historically been bullish indicators. In the 12 months following weeks of at least 6% gains, the S&P 500 has historically averaged 12-month returns of nearly 22%.
Benzinga's Take: Historical market trading patterns are good to keep in mind for perspective, but 2022 is certainly a unique environment of extremely high inflation and aggressive Federal Reserve tightening. The stock market may experience a short-term technical bounce in June, but the market's longer-term performance is likely riding on whether the Fed can effectively bring down inflation without triggering a recession.
