The dog days of summer don’t apply to traders. Seeking profits is an all-season affair. That means traders should have tools handy to capitalize on up or downtrend regardless of what the summer of 2025 brings.
Prognosticating on what will happen to the S&P 500 can bring a variety of forecasts. The adage of “sell in May and go away” could ring true according to some market experts. And that’s especially so in the current economic climate dominated by tariff news.
'Softness in Activity'
“As the summer approaches, we could start to see some softness in activity due to aggressive tariff related front-loading, lagged effects of other policies, and lower business investment activity," noted the JPMorgan global equity strategists.
Previous summers could also provide an indication of what 2025 might do. For example, 2022 saw both equities and bonds head lower for much of the year as runaway inflation and rate hikes took center stage. This put downward pressure on both markets as the S&P 500 lost steam heading into the fall during the summer of 2022. It was a year for the bears as the index lost 18%.
The S&P 500 rebounded with a 23% gain in 2023 though the summer trend was similar to 2022. An initial rally in June and July gave way to a downtrend starting in mid-August.
Unlike the previous two summers, 2024 was different. A presidential election year certainly brought a dose of uncertainty heading into fall, but unlike 2022 and 2023, the S&P started to move higher heading into September. The rally continued through the election and into 2025, giving the index a total return of 25% in 2024.
While three summers is a small data set, it’s already indicative of the fickle nature of markets. As such, traders always want to have the right tools in place. If the bearish trend of 2022 and 2023 repeats itself this year, traders will want to keep the Direxion Daily S&P 500 Bear 3X ETF (SPXS ) close. The fund seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
Still Skewing Toward Upside
Despite recession forecasts, this summer could be a repeat of 2024 (or not). Tariff negotiations could continue through the summer, bringing more volatility to the markets given the 24-hour news cycle. JP Morgan, however, remain positive.
“In the very short term, the equity pain trade likely remains to the upside as the market prepositions on tariff de-escalation,” the JPMorgan strategists said further.
Furthermore, the idea of “Sell in May and go away” could be mythical rather than grounded in reality. American Century Investments noted that the S&P performed positively in the summer months in 38 out of the last 50 calendar years.
If the S&P 500 rises this summer, traders can play the upside with the Direxion Daily S&P 500 Bull 3X Shares ETF (SPXL ). Whether it’s SPXS or SPXL, traders can always be ready for a profitable summer.
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