Can stocks extend five-month winning streak in July?

Britain's top share index hit a 16-month high in June, but couldn't keep pace with America's top-performing tech index.

After a steady start to June, many stock markets hit a record high or, in the case of the FTSE 100, their best since February 2020 and the early days of the Covid crash. But the good times didn’t last.

Things got choppy for the world’s top indices, with a mid-month slide followed by further volatility during the latter part of the month. However, UK stocks have now risen every month since February as they edge closer to pre-pandemic levels.

As has been the case for several months, the key thing investors around the world were wrestling with was the threat of above-target inflation, and the potential need for interest rate rises to combat that.

Perennial top performer, America’s premier tech index the Nasdaq Inc (NASDAQ:NDAQ), did best in the month up to 29 June with a rise of 6.5%. Hot on its heels was the Swiss market with gains of 5.8%, with Russia in third spot with 2.7%.

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Among the laggards was our own FTSE 250 index, down 0.6%, and the Dow Jones, down 0.7%. The FTSE AIM 100 also suffered losses, off 0.2% for the month, but it could have been much worse. The index was down almost 4% at one stage before a late-month rally almost saved the day.

Turning to individual UK stocks, media agency Kin and Carta (LSE:KCT) topped the FTSE All-Share charts for June with a stellar 37% rise.

It’s good to see a very familiar retail name at the top end of the charts, with Morrisons (LSE:MRW) slotting into third place with a 33% rise in price. That followed a bid approach from American private equity firm Clayton Dubilier & Rice which is prepared to pay £5.5 billion, or 230p per share.

Another of Britain’s biggest household names and a staple of many portfolios, BT (LSE:BT.A), has had a very strong June with a rise of 11.8%. There was optimism after it emerged that a company called Altice UK, owned by multi-billionaire telecoms dealmaker Patrick Drahi, had bought a 12.1% stake in BT.

Will investors feel the heat in July?

The FTSE All-Share index has seen an average return of 0.8% in July between 1970 and 2017, according to Harriman’s Stock Market Almanac.

Just over half of the years since then (54%) saw positive returns in the month. This makes July the fifth-strongest month of the year for shares, on average. However, in the past 12 years up to 2020, the FTSE All-Share has risen nine times.

July will be a huge month for US stocks as most of the household names will publish quarterly results during the month and into August. Expectations are for another bumper earnings season, but companies will have to deliver or be punished.

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All eyes will be on US jobs data, inflation numbers and any hints of interest rate rises as investors try and make their decisions during the midsummer month. The Federal Reserve meeting on 27 and 28 July will be key for the markets.