You Know What That's Called Growth

WATERTOWN, Mass. (MarketWatch) -- Last month I said that I thought June looked promising based on fundamentals from earnings growth to liquidity, the jobs market to a robust mergers and acquisitions pipeline, and the global economic story that has re-taken center stage as the driver of our domestic and foreign markets.

I concluded by saying that despite the multiple known reasons to hunker down and wait for the current market's billowing to blow over, I thought there was a reasonable chance that our plans for a June picnic wouldn't be spoiled.

Mirror, mirror on Wall Street

Not much has changed for any of the above ingredients except for the fact that at the end of June we have even higher markets at home and abroad than when we last wrote at the end of May. Couple this with data from our proprietary Beta Weighted Seasonality (BWS) charts and I'm inclined to believe that in July the presence of thunderstorms (in the form of heightened volatility and bearish rumblings) will be a virtual guarantee. Profits will be as easy to predict as lightening strikes.

Greed isn't good, but growth is

Our BWS charts tell us that July is hardly a marketplace for fair weather and fun. In fact, if June provided some ground for a picnic, July's got a full supply of ants.

Notwithstanding the fact that sub-prime mortgages are something you wouldn't want to step in let alone picnic near, and despite the black eye of the ballyhooed private equity player Blackstone (whose stock was the stuff of much "toing and froing" on both Pennsylvania Avenue and Wall Street prior to its open, living up to the hype for one day, only to break back below its offering price in the two subsequent trading days), there are some markets which look ripe for the picking.

Pick an equal weighted ETF

Large-cap growth looks moderately more promising than either large-cap value or a blend of the two. Still, I'd argue for a blend that can enable a fairer playing field between the large-cap value and growth names it encompasses. Doing so creates a greater upside opportunity, even if the upside isn't all that great.

My pick: the Rydex S&P Equal Weight RSP, +0.13% , which lends opportunity to the large-cap area not by virtue of the names it holds but by the way in which it holds them. Its unique equal weight approach enables each stock to start July's marathon on an equal footing; but where they end up will be based on the fate of the market's bias during the month.

Counterbalance your basket

The other side of July's blanket is found where most travelers don't fear to tread; the established foreign markets of Europe and Japan. But here we're looking for the smallest cap stocks in this narrowest of ranges. As such, I'd opt for a more diversified approach to bring home the lard fume (smoked bacon). Wisdom Tree's International Small Cap Dividend DLS, -0.75% and Fidelity's International Small Cap Opportunity FSCOX, -0.44% net a broader basket of stocks that ought to bear the fruit of active management's stock selection complemented by the exchange-traded fund's lower cost.

Equal weight your allocation

Finally, I wouldn't bet the ranch on the July stock market. Again, I'd look for a more diversified way to play what has been, despite the fact that the sun is shining, a historically difficult month to make hay. A BWS analysis of bond funds vs. the Standard & Poor's 500 Index SPX, +0.39% suggests that a diversified bond ETF, the iShares Lehman Aggregate Bond AGG, -0.04% , is one way to enjoy the sunny spells and cast an umbrella over the increased threat of July's ever-present cloudburst.