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  • Writer's pictureRobert Baharian

The Financial Market's Handbook

Updated: Jul 24, 2023

What a difference three months makes? Click here to read my comments from the last quarter. From cracks and fragile markets to new stock bull markets, property prices bottoming out, and inflation back down the 3% (US YoY).


I've always said markets move fast and markets move slow, and there is no better example of what has unfolded over the last six months. Inflation has fallen as fast as it rose and central banks appear to be taken the foot off the gas. Soft landing? Maybe. Until it's not.


As we enter the second half of 2023, the S&P Total Return index is now just 5.6% from making a new all-time high. Last year at this time, the S&P 500 had just seen a 16% drop for the quarter and a 20.6% drop in the first half of the year. It was about as brutal as it gets in terms of market performance over a six-month period. However, history has shown time and time again that the market typically rebounds after such big drops. While it may not have felt good to enter the market when things looked so bad, that’s precisely what investors should have done this time around as well.


Prior to last year’s 16% drop in the second quarter, there had been eight quarterly drops of 15% or more since WW2, and every single time the market was higher over the next six months and year. There had also been just seven 20%+ two-quarter drops since WW2, and in the year after those seven instances, the S&P was higher by at least 22% all seven times.


As we sit here now a year after that horrible end to the first half of 2023, the S&P is up 17.5% since then, which means the streak of gains a year after such extreme market drops continues.


Over the next six months (which takes you to year end), the S&P has averaged a gain of 7.73% in years where the index gained at least 10% in the first half, while the average second-half move in all other years has been less than half that at 3.13%. Finally, over the next year, the S&P has averaged a gain of 12.15% after 10%+ first halves with positive returns 77.3% of the time.


We have updated our Financial Market's Handbook for 2Q 2023 and examine the impact the last quarter has had on key financial indicators that relate to financial markets. You can download the report here. You are welcome to share it across your network.

Thank you for reading, and I hope you enjoy it.

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