The S&P 500 closed higher Friday. Amazon surged. The Dow posted its fourth straight winning month. The Nasdaq and S&P 500 did not post winning months. They posted losing months. In July. The same July the Dow won.
Three indexes. One month. Two different outcomes. This is the part where retail traders Google "how is this possible" and spend six hours learning that indexes contain different stocks. Revolutionary stuff. The Dow has thirty components. The S&P has five hundred. They move independently. Like your portfolio and profitability.
Amazon surged Friday, which helped the S&P close higher on the last day of a month it lost. Picture a guy drowning for twenty-nine days, then doing a really impressive backstroke on day thirty while still drowning. That's your boy the S&P. Up on Friday. Down for July. Both things true. Both things useless.
The Dow kept winning because it owns different stocks than the indexes that kept losing. Boeing's in the Dow. Nvidia's not. That sentence explains July better than ten thousand words of economic analysis, but ten thousand words of economic analysis is what you'll read anyway. People will cite Fed policy. They'll mention rotation trades. They'll draw lines on charts connecting Friday's close to something that happened in 1987. None of it mattered. The Dow has thirty stocks. Enough of them went up four months in a row.
Somewhere right now a day trader is calculating what percentage of his rent money to allocate to Amazon calls because it surged on Friday. He will not ask why it surged. He will not check if the surge continued Monday. He will simply see the word "surges" in a headline and assume momentum is a friend who returns phone calls. It is not. Momentum is a restraining order that expires without warning.
The Dow won July. The S&P and Nasdaq lost July. All three will be wrong by August. The only consistent performer is the guy selling you tutorials on how to read this data.
Photo by Olha Ivanova on Unsplash
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