anticipated moves and fluctuations in stock market performances during the remainder of the year
Headline: S&P 500's First-Half Performance and Its Impact on the Second Half
The S&P 500, a prominent U.S. stock index, has seen a substantial gain of around 15 percent in the first half of 2021, as analysed by Sven Lehmann, fund manager of HQ Trust. This performance has sparked interest in understanding how the index's second-half performance might be influenced.
In an extensive analysis spanning over 150 years, from 1872, Lehmann categorised the S&P 500's performance into six groups, aiming to uncover patterns and trends. Historically, the strongest gain between July and December has followed a market drop at the beginning of the year, with an average increase of 33.1 percent. However, there have only been three instances since 1872 of a drop of more than 20 percent at the beginning of the year, in the years 1877, 1932, and 1962.
In ten cases, the S&P 500 gained more than 20 percent in the first six months of a year, such as 62.6 percent in 1933 and 41.8 percent in 1975. In such instances, the average increase in the second half was 11.1 percent. Yet, it's important to note that the range of second-half performance results, given a first-half gain of 10 to 20 percent, has been quite wide, ranging from a gain of 30 percent to a loss of 20 percent.
Lehmann's key findings suggest that positive first-half returns modestly tilt the odds toward a positive second half but do not reliably predict it. Market dynamics, economic conditions, and external shocks can cause divergence between halves. There is no simple linear or deterministic correlation found in long-term data between the exact magnitude of first-half returns and the second-half outcomes.
Specific factor-based analyses (momentum, quality, volatility) show varied performance patterns within the S&P 500 across different periods, suggesting that sector and style rotations can materially affect the second-half outcomes regardless of first-half returns.
While the first half of 2025 showed about +6.2% gains for the S&P 500, the stock market’s behavior in the latter half depends on evolving fundamentals, earnings, interest rates, and geopolitical factors.
In summary, historically since 1872, positive performance in the S&P 500’s first half modestly tilts the odds toward a positive second half but does not reliably predict it, as substantial variability and market corrections regularly occur within calendar years. Detailed, granular data by half-year and the specific year context are necessary to understand this relationship fully. No definitive arithmetic rule governs full-year gains based solely on first-half returns over the entire 150+ year history.
It's essential to remember that this analysis does not offer specific predictions or conclusions about the rest of the year based on the S&P 500's first-half performance. As always, it's crucial to consider various factors and stay informed about the latest market developments when making investment decisions.
If you're considering investing in the stock market, analyzing the impact of the S&P 500's first-half performance on its second-half performance could be a key factor. For instance, a positive first-half return, like the 15 percent gained in 2021, could modestly increase the odds of a positive second half, but it doesn't reliably predict it. However, there's substantial variability and regular market corrections within calendar years, so it's important to consider various factors and stay informed about the latest market developments when making investment decisions, including financial aspects such as interest rates and insurance-related factors like geopolitical risks. In the realm of finance, understanding how the stock market behaves is crucial for investing wisely, be it in the stock-market or other areas like insurance or investments.
