HomeTrading NewsThe worst first half for stocks since 1970? It’s not as bad as it looks.

The worst first half for stocks since 1970? It’s not as bad as it looks.

The headlines are everywhere: with one day left in the first half of the year, the S & P 500 is down 19.9%, its worst six month start to the year since 1970. Since 1970? Sounds like the world is ending. But it’s not. Let’s put some perspective on what is admittedly a lousy start to the year. First, get away from the obsession over the calendar year. There are plenty of periods where stocks have fallen 20% or more over any six month period, including drops of as much as 43%. Here are all the 6-month periods when stocks have fallen more than 20% since the inception of the modern S & P index in 1957. 6 Months Ending Index Loss 2/28/2009 -42.7% 11/30/2008 -36.0% 1/31/2009 -34.8% 9/30/1974 -32.4% 3/31/2009 -31.6% 10/31/2008 -30.1% 12/31/2008 -29.4% 9/30/2002 -28.9% 8/31/1974 -25.0% 6/30/1962 -23.5% 6/30/1970 -21.0% 11/30/1987 -20.6% 12/31/1974 -20.3% Source: Adviser Investments There’s been 13 periods where the S & P has dropped more than 20% since 1957. That works out to about once every five years. Not that common, but certainly not unheard of. There’s something else that jumps out of this data: most of the 20% drops have occurred in the last twenty years, and the majority occurred around the Great Financial Crisis between 2007 and 2009. Seven of the eight worst 6-month drops have occurred since 2002. And yet, the S & P is up 270% since 2002. How about covid, you ask? The worst 6-month period saw a drop of 13.2% in the 6 months ending March 2020. Not even close to a 20% drop. So let’s keep the alarmist headlines in perspective. I’ll leave the last word to Dan Wiener from Adviser Investments, who also runs the Independent Adviser for Vanguard Investors newsletter: “To imply that you’d have to have at least one foot in the grave to have experienced a six-month loss of 20% is silly, and disingenuous.”

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