LIVE MARKETS-With typically turbulent months ahead, 'buy, bail, or just sit tight?'

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WITH TYPICALLY TURBULENT MONTHS AHEAD, 'BUY, BAIL, OR JUST SIT TIGHT?'

With July nearing its end, investors are beginning to worry that the U.S. equity markets have gone too far, too fast. Indeed, the S&P 500 index .SPX has rallied more than 28% since its April 8 close.

Sam Stovall, chief investment strategist at CFRA, is noting that "during the prior decline, however, the S&P 500’s consensus earnings growth forecast for all of 2025 was reduced by 47%, according to S&P Capital IQ. What’s more, the CNN Fear/Greed Index, which is typically viewed as a contrary indicator, recently registered 'Extreme Greed.' Finally, the calendar is about to enter the most challenging seasonal period for equities (August through October)."

Stovall adds that since WWII, August and September, on average, have been down months for the S&P 500, with September being the only month to fall more frequently than it has risen.

Additionally, October, which he says is by far the most volatile month, is not far off as well.

As a result, Stovall says "investors are asking if they should buy, bail, or just sit tight?"

"Short-term setbacks can happen at any time, since declines of 5% or more have occurred annually on average since WWII," Stovall writes in a note.

According to Stovall, although the S&P 500 has already endured a decline of 19% this year, history suggests corrections (declines of 10.0% to 19.9%) have been followed in the same year by pullbacks (-5.0% to -9.9%) five times.

Yet, he says factors propelling stocks today include a rising count of concluded trade agreements (including this weekend’s EU deal), resilient U.S. GDP growth, broadening stock and industry participation, combined with upward revisions to Q2 and full-year 2025 earnings growth estimates.

Even though Stovall admits there are pockets of excess, and the market may experience a near-term setback, "we don’t see it halting the bull market’s run."

(Terence Gabriel)

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