The strongest month in history is coming! Goldman Sachs: Multiple positive factors resonate, driving strong momentum for US stocks in July
Goldman Sachs' analysis team pointed out that the S&P 500 index will continue to rise driven by four major factors: improved liquidity, reduced market volatility, fading recession concerns, and seasonal benefits. The upward trend is expected to last for several weeks, but may weaken after August. Historical data shows that July is the strongest month for the S&P 500, with an average return of 1.67%. It is expected that global stock markets will see an inflow of about $80 billion in the next month
According to the Zhitong Finance APP, Goldman Sachs' capital flow analysis team pointed out that the S&P 500 index is expected to continue its upward trend this month driven by four major factors: continued improvement in liquidity, a sharp decline in market volatility, fading recession fears, and seasonal benefits. However, this round of gains is expected to gradually weaken in August.
The team analyzed in a client report released on Monday: "We believe the current upward trend will continue for several weeks, but signs of fatigue will emerge after entering August."
Historical precedents indicate that the S&P 500 index is likely to extend its 25% increase since the April low. The last time the index experienced a monthly decline in July dates back to 2014.
"Historically, we are entering the strongest months for the S&P 500 index—dating back to 1928, the average return for the index in July is 1.67%," Goldman Sachs analysts specifically pointed out that the first two weeks of July have traditionally been the best-performing period for the stock market throughout the year.
In addition to seasonal factors, Goldman Sachs believes that this round of gains is also supported by multiple factors: the decline in volatility improves capital flow and market sentiment, and systematic investors using fixed stock selection rules still have ample capital allocation waiting to enter the market. It is estimated that global stock markets may see an inflow of about $80 billion in the next month.
The liquidity environment continues to improve. The Goldman Sachs team wrote: "In this round of rebound, efficient risk transfer capabilities have provided a healthier environment for market trading." At the same time, Wall Street sentiment has clearly warmed: tensions in the Middle East have eased, and the Trump administration has made progress on several trade agreements. Investors' attention has shifted to potential interest rate cuts by the Federal Reserve, and concerns about economic recession are fading.
However, there are still concerns in the market: leading sectors are concentrated, low-quality stocks are performing prominently, and bullish positions have significantly increased. Starting this week, important economic indicators such as U.S. employment data will be released successively.
A stock strategist team from another Wall Street giant, Citigroup, is relatively cautious. The institution's strategists warned in their report: "The current upward trend has already allowed bullish positions to reap substantial profits, with the Nasdaq and Russell 2000 indices performing particularly well, with average holding returns reaching about 5%. The risk of short-term profit-taking may suppress further upside potential."
