This bear has claws.
A bearish market that began on the first trading day of 2022 brought down the S&P 500 during its worst first six months to a calendar year in 52 years, as investors plunged into the second half to fear a monetary tightening aggressive by the Federal Reserve and other major central banks. it could bring the economy down in recession.
The S&P 500 SPX,
it fell 20.6% to date until Thursday’s close, marking its biggest drop in the first half since the 21.1% drop in 1970, according to Dow Jones Market Data. The benchmark index fell 21.1% from its final record on January 3. The index earlier this month ended for the first time more than 20% below the record in early January, confirming that the pandemic bullish market, as widely defined, had ended in January. 3, marking the beginning of a bear.
The S&P 500 has bounced around 3.2% from its 2022 minimum close of 3,666.77 set on June 16th.
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Data collected by Dow Jones Market Data shows that the S&P 500 has recovered after falling 15% or more during the first half. The sample size, however, is small, with only five cases dating back to 1932 (see table below).
Yield of the second half of the S&P 500 after a fall in the first half of 15% or more
Dow Jones Market Data
The S&P 500 rose in each of these cases, with an average increase of 23.66% and an average increase of 15.25%.
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Investors, however, may also want to pay attention to metrics around bear markets, especially with speculation about whether the Federal Reserve’s aggressive tightening agenda will sink the economy into recession.
In fact, an analysis by the Wells Fargo Investment Institute found that recessions accompanied by a recession, on average, lasted 20 months and produced a negative return of 37.8%. The bearish markets out of a recession lasted 6 months on average, almost the duration of the current episode, and had an average return of -28.9%. Overall, the average bear market lasted an average of 16 months and produced a return of -35.1%.
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Other important indices will also record historical falls in the first half. The Dow Jones Industrial Average DJIA,
it fell 15.3% until Thursday, its worst first half since the 23.2% drop in 1962.
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As the table below shows, the performance of the second half of the blue chip indicator after drops of 10% or more in the first half is variable. The most recent incident, in 2008 during the worst of the financial crisis, caused the Dow to fall 22.68% more during the second half of the year.
DJIA yields in the second half after falling 10% in the first half
Dow Jones Market Data
In all 15 cases, the Dow rebounded in the second half two-thirds of the time, producing an average second-half increase of 4.45% and an average gain of 7%.
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The Nasdaq Composite COMP with great technology,
fell more than 29% during the first half, its biggest drop on record. There was little to do when Dow Jones Market Data looked back at first-half falls of at least 20% for the indicator.
There were only two cases, in 2002 and 1973, and both saw the Nasdaq continue to fall for the rest of the year, falling by about 8.7% during the second half in both cases.
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