Jul
21

After a Strong, Stable First Half of 2017, What May be Ahead for the S&P 500?

Posted July 21, 2017 by
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Time to read: 3 minutes | 

Last year, global financial markets reacted sharply to the UK’s vote to leave the European Union. The decision for the country to begin negotiations for withdrawal, referred to as Brexit, prompted doubts about the future of the world’s second largest economy.

The aftermath of Brexit rocked investment markets as well and resulted in a 5% correction for the S&P 500.  Since then, we’ve experienced the longest stretch without a 5% correction in over 20 years. How does this bode for the S&P 500 for the rest of 2017?

Don’t fight the trend.

Over time, the risk of an inevitable 5%+ market decline rises. Understanding this probability, we thought it might help to share yet another rarity about the historical performance of the S&P 500.

This year, the S&P 500 has closed higher every month since January. This pattern has only happened seven times since 1928, as noted in the chart below. Historically, the S&P 500 performance in the remaining six months of each of those years has tended to be positive with a median return of 8.44%.

As many of our clients and regular readers know, one of our key short-term investment rules is “Don’t fight the trend.” While there’s no guarantee that the S&P 500 performance will follow the pattern in the remainder of 2017, we remain in the bullish camp and will watch our models closely for deterioration of the positive trend before making any investment changes.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.