What follows for the stock market after the worst first half since 1970? Here is the story.

A bear market that started shortly after the calendar change in 2022 has the S&P 500 on track for the worst first half of 52 years. Investors looking forward to the end of the year may have something to hope for, even though the story is just a rough guide.

The S&P 500 SPX,
-0.07%
fell 19.8% year-on-year until the close of Tuesday, the worst first half since 1970, according to Dow Jones market data. The high capitalization benchmark falls 20.3% from its record high on January 3rd. The index ended more than 20% below this record earlier this month in early January, confirming that the pandemic uptrend – as it is widely defined – had ended in January. 3, which marks the beginning of a bear.

The S&P 500 jumped about 4% from the low close of 2022 of 3,666.77 set on June 16.

Data gathered from Dow Jones market data show that the S&P 500 has recovered after falling 15% or more in the previous first half. The sample size, however, is small, with only five cases dating from 1932 (see table below).

S&P 500 performance in the second half after falling 15% or more in the first half

Dow Jones market data

The S&P 500 rose in each of these cases, with an average rise of 23.66% and a median rise of 15.25%.

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Investors, however, may also want to pay attention to the measurements around bear markets, especially with speculation-whether-you-want-to-know whether the Federal Reserve’s aggressive tightening agenda will plunge the economy into recession.

Indeed, an analysis by the Wells Fargo Investment Institute found that recessions accompanied by recessions, on average, lasted 20 months and produced a negative return of 37.8%. The bear markets outside the recession lasted 6 months on average – almost as long as the current episode – and recorded an average yield of -28.9%. Overall, the average bear market lasted an average of 16 months and had a yield of -35.1%.

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Other important indicators are also set to record historic declines in the first half. Dow Jones Industrial Average DJIA,
+ 0.27%
decreased by 14.8% from the year until today until Tuesday, which would be the biggest drop in the first half of 2008.

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As the table below shows, the performance of the second half for the blue-chip counter after a drop of 10% or more in the first half is variable. The most recent incident, in 2008 during the worst economic crisis, saw the Dow fall another 22.68% in the second half of the year.

DJIA performance in the second half after a 10% drop in the first half

Dow Jones market data

In 15 cases, the Dow rallied in the second half of the year by two-thirds, averaging 4.45% in the second half and just 7% on average.

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The heavy for Nasdaq Composite COMP technology,
-0.03%
fell 28.5% year-on-year until the close on Tuesday, but there was nothing to continue when Dow Jones market data looked at first-half drops of at least 20% for the meter.

There were only two cases – in 2002 and 1973 – and both saw the Nasdaq decline in the rest of the year, falling about 8.7% in the second half in both cases.

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