A blistering stock return this year makes the case for a strong second half

Stocks made little noise during a shorter session on Monday.

Investors will return for a full trading day Wednesday with a strong eye on how the second half of 2023 develops.

People would be forgiven for expecting some bearish bounce in the coming months. But after chopping and chopping the huge returns from the first and second quarters, our business shows the tape that clearly shows history with the bulls.

Looking back over the past 95 years of S&P 500 (^GSPC) history, at 61 years, first-half returns have been positive.

In 28 years — or roughly half the time — the index has posted double-digit gains, including this year that saw the index rise 16% to start the year. And in these years, the second half has returned, on average, 6% with a win rate of 75% and average specific percentage from 0.87. The average return after these years was even stronger at 9.7%.

S&P 500 returns after a 10% increase in the first half of the year

Just looking at the first six months’ returns after a year of negative results — which includes this year — improves the odds.

In those 10 years, the average second half return was 9.8%, the average return was 11.5%, the win rate was 80%, and the average Sharpe rate was 1.82. Of course, this suggests that the mean retracement is still alive and well, but on an annual rather than semi-annual time frame.

The exact results for the S&P 500 shown here differ slightly from those we found for the Nasdaq Composite (^IXIC), which seems put off by results that are simply “too good.”

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With the S&P 500, we didn’t find significant edges to be found by filtering for the total number of positive days or the total number of days above the 10-day moving average.

NEW YORK, NY - JUNE 01: Knife River Corporation (NYSE: KNF) CFO Nathan Ring (left) rings the bell on the floor of the New York Stock Exchange (NYSE) as the company goes public on June 01, 2023 in New York City.  Despite the passage of the debt ceiling bill in the US House of Representatives, the Dow Jones was down in morning trading.  (Photo by Spencer Platt/Getty Images)

Knife River Corporation (NYSE:KNF) CFO Nathan Ring (left) rings a bell on the floor of the New York Stock Exchange (NYSE) as the company goes public June 1, 2023 in New York City. (Photo by Spencer Platt/Getty Images)

However, the bottom line for investors is that the strength we’ve seen so far this year tends to generate more strength. At least when it comes to the S&P 500.

Seasonal tailwinds can account for up to a third of an instrument’s returns, which means the final direction of the major indices remains highly dependent on fundamentals. du day.

Accordingly, we will continue to follow the Fed’s preferred economic reports and earnings for the second quarter of this month obsessively.

But those who ignore history, in markets or otherwise, do so at their own risk.

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