Stock conditions are likely to be tough as investors return from Memorial Day weekend. June has historically been the worst month for all three major averages during midterm election years, according to the Stock Traders Almanac. Historically, the S&P 500 has declined an average of 2.1%, while the Dow Jones Industrial Average and Nasdaq Composite have each declined 1.9%. By comparison, the S&P 500 index rose an average of 0.2% in June with data dating back to 1950. The technical environment is also deteriorating as fewer stocks participate in the rally and momentum stalls. As an example, a sell signal was triggered on Monday, May 18, ending the best six months for the Dow and S&P 500, according to Stock Traders Almanac Editor-in-Chief Jeff Hirsch. The Nasdaq’s “best eight months” typically don’t end until June. The consensus on Wall Street is that stocks need some consolidation over the summer after surging from their March lows. The S&P 500 index has risen about 19% since the end of March, topping 7,500 for the first time last week. It has recently been a little off that high. Hirsch said the key support level to watch for the S&P 500 is 7,150, which he expects to fall roughly 4% to 5% from current levels. But he also wouldn’t be surprised if the broader index returns to 6,600 or 6,700 at some point in the summer to close the April ceasefire gap. This corresponds to a 10% to 12% correction. In the wider world, there is no shortage of macroeconomic risks that can damage markets. The energy shock caused by the US war with Iran has caused inflation to rise and US bond yields to rise. But Hirsch expects some choppy activity in the short term to set the market up for a year-end rally. He still expects the stock market to end the year 8% to 12% higher than its 2025 closing price. “The calendar is only going to get worse from here before it gets better,” Hirsch wrote.
