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3 Reasons It Is So Bad It is Good

3 Reasons It Is So Bad It is Good

June 22, 2022

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.

View enlarged chart.

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.

View enlarged chart. 

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).

View enlarged chart.

Posted by Ryan Detrick, CMT, Chief Market Strategist

For more on what is needed for the bear market to end, the latest on the Fed and economy, please watch our latest LPL Market Signals with Ryan Detrick and Jeff Buchbinder.



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