What to Expect From Stocks After a Strong First Half

Plus, 25 other stocks to target for the rest of the year

Senior Quantitative Analyst
Jul 3, 2024 at 8:11 AM
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The S&P 500 Index (SPX) gained about 14.5% in the first half of 2024. Double-digit returns in the first half are becoming common; in fact, its the third time in four years (and four of six) that the S&P 500 gained at least 10% through June. The last time we saw this was the late 1990’s, when the index gained double digits three years in a row (1997 – 1999). That was right before the tech bust, so hopefully, that’s not foreshadowing .

This week, I’m looking at what we can expect for the second half of 2024 based on the strong first half. I’ll break down the numbers in a few ways to suit the current environment to past years.

The Stock Market Sweet Spot

Since 1950, the second half of the year has averaged a return of just under 5%. Based on the table below, it seems the better the first half, the better the second half. When the S&P 500 gained 10% or more in the first half of the year, the second half averaged a return of 7.7% with 83% of the returns positive. Those numbers are better than other years. When you narrow down the returns to those within +/- 5% of the 2024 returns, the results have been even better. In the 20 instances in which the index gained between 9.5% and 19.5%, it averaged a second-half return of 10% with an impressive 19 of 20 returns positive. Looks like we’ve landed right in the sweet spot of first-half returns.

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Here’s another table suggesting a strong second half. This data goes back to 1994, the first full year of Cboe Volatility Index (VIX) data we have in our database. The average VIX close in the first half of 2024 was 13.9, which is on the low end. When the VIX average in the first half was less than 15, the S&P 500 averaged a return of 7.6% in the second half with seven of eight returns positive. These numbers are easily better than when the VIX averaged a higher closing level.

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25 Second-Half Stocks to Watch

In this section, I’m listing stocks that have tended to perform exceptionally well and stocks that have disappointed in the second half of the year. This first table shows the best S&P 500 stocks in the second half of the year over the past 10 years. Six stocks have been positive every single time over this time frame. Microsoft (MSFT) is the biggest name on the list which contains a good number of technology stocks and finance related stocks.

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This last table shows stocks which have done poorly in the second half of the year over the past 10 years. Oil stocks are prominent at the top of this table.

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