Stocks close their worst first half in 52 years, and here’s the big picture you need to know 

Closed on Thursday as Wall Street bid farewell to a dismal second quarter and first half. All three major indices ended the month and quarter down. The S&P 500 posted its worst half since 1970, the Dow had its biggest first-half decline since 1962, and the Nasdaq had its biggest percentage decline yet.This is the second straight quarter of declines for all three indices. This year, markets have been rocked by a series of hostile headwinds: Russia’s war in Ukraine, Covid-19 lockdowns in China, rising inflation and aggressive rate hikes by the Federal Reserve. All of these factors have fueled investor fears of a recession and prompted a race to exit. The S&P 500 has lost a total of $8.2 trillion year-to-date, suffering its worst June since 2008 and worst quarter since 1970.All 11 sectors are down, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. In short, things are looking terrible. But that doesn’t mean they will stay that way.

Correlation and Causation

The good news is that after a poor performance, the market always goes back up. The performance of the S&P 500 in the first and second half of the year hardly correlates, at least historically.The S&P 500 lost 21% in the first six months of 1970 but rebounded, gaining 27% in the second half, according to data from the S&P Dow Jones Indexes. The bad news is that the quarter that follows isn’t always great when markets fall so sharply. During the past three worst starts to the year with falls of 5% or more, the S&P 500 fell 6.8%, 2.2% and 2.2% in the third quarter.1%, said Sam Stovall, chief investment strategist at CFRA Research.  

Beat the Bear

But time does matter, Stovall added. It took just 161 calendar days for the market to fall from its January 3 peak to the current bear market. That’s much faster than the typical average time frame of 245 days. And a fast bear isn’t usually as big and scary as a slow, stocky one. Historically, markets that took less than 245 days to go from peak to bear, measured against a 20° threshold, posted losses of less than 27%.Those who take the longest to fall see losses of 33%. US stocks generally do well after entering bear markets, at least in the long term. According to Ryan Detrick, chief market strategist at LPL Financial, shares have risen an average of nearly 15% per year after entering bearish territory, with an even better average gain of 23.8%. It’s not uncommon for stocks to recover quickly from bear market bottoms, Detrick said.The average bear market takes about 19 months to recoup all of its losses, but when the S&P 500 falls less than 25%, rallies last an average of just seven months. Recently, the recovery has been even faster: the last three bear markets have taken only four or five months to erase losses.  

Feeling Presidential

  Presidential cycles also have a historical impact on markets, Stovall said. And that’s good news for investors today. According to a CFRA analysis from 1944 to the present, the average return of the S&P 500 is negative in the second and third quarters of a president’s second year in office, but markets rebound in the fourth quarter with an average increase of 6.4%. Read more : Learn from Indonesia : Startup layoffs storm Read more : Crisis 2022: Early Warning came from  the World Bank Read more : Michael Jordan Approaches Mike D’Antoni to become Hornets Coach Read more : Barcelona MotoGP Game : Aleix Espargaro Mistakes Explain Read more : Ted Pick “Morgan Stanley” : The mindset shift has started in the market  The third year of a presidential term is by far the best performance on average, with the S&P 500 growing about 16%. So here is a very green 2023!

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