As Goes the Rest of this Week, So Goes the Second Half of the Year?
As the last few days of the first half of 2006
come upon us and the S&P 500
(
SPX |
Quote |
Chart |
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PowerRating) is trading near break-even, we asked,
“How does the market perform the second half of the year after it has risen the
first half of the year?” And, “How has it performed the rest of the year after
it has declined the first half of the year?”
We went back to 1963 to get our answer. Since 1963, the S&P 500 has risen 27
times in the first six months of the year. When this has occurred, it has then
proceeded to rise better than 80% of the time the next six months (81% of the
time, for an average gain of nearly 5%).
When the market has declined the first half of the year, the results are not as
pretty. The market has dropped 56% of the time after declining the first half of
the year. And the average return for the next six months has been under 1%.
Past results are, of course, not indicative of future returns. But, looking
back, the odds say: as the next few days go, the rest of the year may go.
Let’s hope for a nice rally before the holiday weekend!
Ashton Dorkins
Editor-in-Chief