3 Reasons To Stay Bullish On Stocks In The Second Half Of 2021

The SPDR S&P 500 ETF SPY is now up nearly 95% from its March 2020 lows, and it’s understandable why some investors may be getting a bit uneasy about the big run after the S&P 500 tacked on another 14.4% gain in the first half of 2021.

Bank of America analyst Stephen Suttmeier took a look back at the S&P 500’s historical performance and found at least three reasons history suggests investors should still feel comfortable buying stocks heading into the second half of the year.

1. Good First-Half Performance A Bullish Second-Half Indicator
Historically, when the S&P 500 has an above-average first-half return, it follows up with an above-average second-half return 77% of the time, Suttmeier said.

The S&P 500 has averaged a 6.3% second-half return following a strong first-half, well above its 1.7% average second-half return in years with below-average first-half returns. The average peak-to-trough S&P 500 second-half drawdown following above-average first halves is -6.6% compared to an average drawdown of 10% after a below-average first half.

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2. First Year Of Presidential Cycle Bodes Well For Returns
Historically, the second half of the first year under a new U.S. president has been underwhelming, generating an average return of just 1%. However, years in which the market performs well in the first half under a new president have produced an average return of 5.9% in the second half of the year.

Following an above average first-half during year one of a presidential cycle, 67% of second-half drawdowns are in the 0% to 5% range and 78% of drawdowns were less than 10%.

3. Strong First Halves Good News In Bull Markets
During a secular bull market, the S&P 500 has averaged a 9.1% second-half return following an above-average first-half return. In these years, the S&P 500 has generated a positive second-half return 86% of the time. In addition, the S&P has only experienced one historical second-half drawdown of at least 20% in these years, the Crash of 1987.

Benzinga’s Take: Looking back at market history can help investors keep things in perspective and provide some helpful insight into market tendencies. Unfortunately, past performance is not necessarily indicative of the future, and there are countless variables impacting U.S. markets in the near term.