History has some more good news when it comes to what the stock market could have in the store for the second half of 2023. Markets often move on momentum, so when things trend in one direction or another, they usually continue that way until a catalyst comes along to force a change in the trend. So, the market’s robust first half, in which the S & P 500 posted a nearly 16% gain, presents a strong case for a good second half if history repeats itself. But this market has one more thing going for it: a good first half following a bad 2022. “2023 YTD has not lived up to investors’ bearish expectations,” Stephen Suttmeier, technical research strategist at Bank of America, said in a client note. “This is potentially bad news for the bears: The SPX tends to continue its winning ways in 2H after a solid 1H.” There’s more to it than that, however. When the index posts an above-average first half following a down year — it was nearly 20% in the red for 2022 — the result has been positive returns 86% of the time for the second half, and 100% of the time for the full year, according to data compiled by BofA. Breaking it down further, the average second-half return under those circumstances is 11.1%, suggesting a value of 4,945 by the end of 2023. The historical trend already had been favorable for the market based on the first-half returns. A rally of more than 10% in the first half has been followed by like-sized gains 46% of the time, and there was only one occasion, in 1946, when the market wasn’t at least positive for the full year, Suttmeier said. Moreover, the S & P 500 has posted full-year gains of 20% or more for the year 68% of the time after having a 10%-plus run in the first half. .SPX YTD mountain SPX year to date To be sure, history offers no guarantees. The second half also is likely to feature a high level of uncertainty along with a looming recession threat and uncertainty over how the Federal Reserve reacts to changing economic conditions. Still, Bank of America of late has changed its own bearish tune, with Savita Subramanian, one of its top strategists, recently saying that this is the most bullish she has been in at least 10 years.
