Once investors come back from Memorial Day weekend, the setup for stocks looks tough. June is historically the worst month for all three of the major averages during midterm election years, according to the Stock Trader’s Almanac. The S & P 500 has lost 2.1% on average in the past, while the Dow Jones Industrial Average and Nasdaq Composite have slid 1.9%, each. By comparison, the S & P 500 has gained 0.2% in an average month of June, across all years in data going back to 1950. The technical setup is deteriorating, too, as fewer stocks participate in the rally and momentum stalls. In one example, a sell signal was triggered Monday, May 18, marking the end of the best six months for the Dow and the S & P 500, according to Jeff Hirsch, editor in chief at the Stock Trader’s Almanac. The Nasdaq’s “best eight months” usually doesn’t end until June. It’s becoming the consensus on Wall Street, too, that stocks are due for some consolidation over the summer months, after their soaring rally off the March lows. The S & P 500 has climbed roughly 19% since the end of March, topping 7,500 last week for the first time ever. It was recently just a little off those highs. Hirsch expects 7,150 is a key support level to watch in the S & P 500, roughly a 4% to 5% decline from current levels. But he also wouldn’t be surprised if the broader index pulls back to 6,600 or 6,700 to fill the April ceasefire gap at some point over the summer. That would equate to a correction of 10% to 12%. In the broader world, there’s no shortage of macroeconomic risks that could hurt the market. The energy shock from the U.S. war in Iran is raising inflation, and pushing up Treasury yields. But Hirsch expects that some choppy action in the near-term will better prepare the market for a late-year rally. He still expects the stock market will end the year higher by 8% to 12% versus 2025’s close. “The calendar gets worse from here before it gets better,” Hirsch wrote.
