Market Outlook · July 06, 2022

Making Sense: Worst First Half of the Year for Equities Since 1970

Brent Ciliano

CFA | SVP, Chief Investment Officer

Phillip Neuhart

SVP, Manager of Institutional Portfolio Strategy

The first half of 2022 has continued the rocky path of multi-decade high inflation, global supply chain issues, slowing US and global growth, geopolitical conflict, the war in Ukraine, and—possibly most importantly for equity and fixed income markets—massive change in Federal Reserve monetary policy compressed into a short period of time.

In response to these pressures, the S&P 500 experienced the fourth worst first half of a year since 1928.

Key takeaways

  • S&P 500 performance from June through year-end was mixed and choppy. Average and median returns were flat.
  • Subsequent cumulative market returns 1, 3 and 5 years from June lows saw the S&P 500 positive for 60%, 80% and 93% of observations, respectively.
  • 1-, 3- and 5-year cumulative returns after June lows for the S&P 500 were up 16%, 43% and 82% on average, respectively.
  • The average and median time to recovery back to beginning-of-year values were 20 and 14 months, respectively.
  • The top 5 largest drawdowns saw both much higher average subsequent cumulative market returns 1, 3 and 5 years after June lows (44%, 60% and 123%, respectively), as well as much faster average and median recovery times of 10 and 5 months.

The bottom line

Historically, poor starts to the year have seen mixed results through the end of the year but significant gains 1, 3 and 5 years after market lows.

Staying invested and having both a forward-looking view and a comprehensive financial plan may help investors better weather the storm.

View the PDF below for a more in-depth look at how markets responded to the fourth worst half of the year since 1928.

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