• J. J. Wenrich CFP®

Market Commentary: 3 Reasons It Is So Bad It is Good

Updated: Jul 5

Markets Blog

Market Commentary


Summer is finally here, but 2022 is still shaping up to be one of the worst years for investors ever. That’s the bad news, the good news is the year isn’t over yet and here are three reasons the bulls shouldn’t throw in the towel just yet.


“The S&P 500 Index is down 21% for the year, which would be the worst first half to any year since 1970,” explained LPL Financial Chief Market Strategist Ryan Detrick. “As bad as that has been for investors, the good news is previous years that were down at least 15% at the midway point to the year saw the final six months higher every single time, with an average return of nearly 24%.”


As the table shows below, big drops to start a year tend to see big bounces back. Although most investors probably don’t feel like that is possible in 2022, just remember history says a surprise bullish move is possible.


Next, as shown in the LPL Chart of the Day, a horrible quarter tends to see a nice snapback. Looking at previous quarters to lose at least 15%, the next two quarters stocks were higher 7 out of 7 times with an average return of more than 17%. Things get even better going out a full year, up nearly 30% on average. That is something most investors aren’t expecting right now, but we are guessing they’ll be quite happy should history repeat.



Lastly, the S&P 500 fell more than 5% back-to-back weeks, another potentially bullish development. In fact, after previous times the S&P 500 fell that much, a year later it was up more than 28% on average and down only once (1987).




IMPORTANT DISCLOSURES


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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.


Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. For more information on the risks associated with the strategies and product types discussed please visit https://lplresearch.com/Risks


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.


Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.


All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.


Securities and advisory services offered through LPL Financial, a registered investment advisor and broker-dealer. Member FINRA/SIPC.

Tracking # 1-05295592