Understand why US stocks closed in the worst first half of 52 years

The S&P 500 recorded its worst first half in 50 years, down 20.6% in the first six months of 2022.

Shares closed (30) on Thursday as Wall Street said goodbye to the sad second quarter, the first half of the year.

All three major indexes ended the month and quarter in red.

The S&P 500 had its worst quarter since 1970, the Dow Jones had its biggest drop in the first half since 1962, and the Nasdaq had its biggest percentage drop ever. This is the second consecutive decline for all three indices.

This year the markets have been shaken by a number of hostile winds. Russia’s war against Ukraine, Covid-19 blockade in China, rising inflation բարձր Aggressive interest rate hikes by the Federal Reserve. All of these factors have fueled investor fears of a recession, leading to a rush to the exit.

The S&P 500 has lost $ 8.2 trillion since the beginning of the year, its worst June since 2008 և The worst quarter since 1970, all 11 sectors are in red, according to S&P Dow. Howard Silverblatt, senior analyst at Jones Indices. .

In short, everything seems terrible. But that does not mean they will stay that way.

Ratio և causality

The good news is that after a bad result, the market always goes backwards.

There is also very little correlation between the performance of the first “second half” of the S&P 500, at least historically. The S&P 500 lost 21% in the first six months of 1970, but returned 27% in the second half, according to the S&P Dow Jones Indices.

The bad news is that when markets shrink so significantly, the next quarter is not always great. The S&P 500 fell 6.8% and 2.2% և 2.1% in the third quarter to a three-year low of 5%:, according to chief financial strategist Sam Stoval. CFRA Research contributions. .

market bear

But time is of the essence, Stoval added. It took 161 calendar days for the market to descend from its peak on January 3 to the current bear market. This is much faster than the average 245 days.

And the fast bear is usually not as big and scary as the slow and heavy bear. Previously, markets with peaks below the 245-day moving average had losses of less than 27%. Those whose decline lasts longer have a 33% loss.

US stocks usually work well after entering bear markets, at least in the long run.

Shares are rising by an average of about 15% a year after hitting bear territory, with an even better average profit of 23.8%, according to LPL Financial chief market strategist Ryan Detrick.

It is not uncommon for stocks to recover rapidly from the bear market low, Detrick said.

It takes the average bear market about 19 months to make up for all its losses, but when the S&P 500 falls below 25%, the recovery takes an average of just seven months. Recently, the recovery was even faster. It took the last three bear markets just 4-5 months to make up for the losses.

presidential influence

Presidential cycles also have a historic impact on markets, Stoval said. And that’s good news for investors today.

According to the CFRA analysis from 1944 to date, the average yield of the S&P 500 during the second to third quarters of the second year of the presidency was negative, but in the fourth quarter the markets recovered, growing by an average of 6.4%. .

The third year of the presidency is, in fact, the best result on average: the growth of the S&P 500 has increased by about 16%.

This content was originally created in English.

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