The wild ride of 2020 continues, with the S&P 500 Index down 20% in the first quarter and up 20% in the second quarter. Much like dropping a 20 dollar bill and picking it up, this doesn’t mean you are 20 dollars wealthier. Down 20% and then up 20% actually comes out to a 4% drop for the first half of the year.
What does a negative first half of the year tell us? Turns out, gains could be hard to come by the second half of this year. “Although 2020 is like nothing we’ve seen before, the fact of the matter is a weak first half of the year could mean weaker than normal returns for the rest of the year,” according to LPL Financial Senior Market Strategist Ryan Detrick.
In fact, the S&P 500 had been higher in the first six months of the year a record nine consecutive years before being lower in 2020. Since 1950, there were 48 times when the first six months were higher and the rest of the year gained 77% of the time and added 5.8% on average those final six months. Compare that with when the first six months of the year were lower 21 times, the final six months were higher only 52% of the time and up only 1.2% on average.
As shown in the LPL Chart of the Day, a move higher is quite likely after strength in the first six months of the year, while very modest gains could be in the cards if those first six months underwhelm.
Be on the lookout for our Midyear Outlook 2020, set to be released on July 14, for more of our thoughts on what the second half of 2020 could bring. Last, don’t forget to listen to our latest LPL Market Signals podcast, where we discuss trends impacting markets right now.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value