Predicting Better Days Ahead, LPL Leans Into Equities

Stocks historically have rallied following big two-quarter slides like the market just experienced, with the S&P 500 index gaining 21.5% on average in the two quarters following a more than 20% two-quarter fall, Buchbinder said, noting that the index fell 20.6% in the first half of this year. Average performance in the following year has been 31.4%, he said.

There’s no guarantee that these patterns will repeat this time, but they should offer encouragement that stocks may see better days, Buchbinder noted.

He also noted that stocks have tended to do well in July, with the S&P 500 gaining an average 2.5% during the month in the past decade. April, November and December are the only months that have been better for stocks since 1950, according to Buchbinder’s post. And shallow bear markets like the current one often reach their bottom at seven months, which happens to be July this time, he said.

Upcoming inflation data, third-quarter earnings reports and Fed comments late this month will help show whether July 2022 follows the historic trends, Buchbinder said, adding that LPL likes the chances.