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  • Writer's pictureKyle Rolek, Retirement Planning Specialist

Potential Good News? S&P 500 Index 1st-Half vs. 2nd-Half Performance Data During Bad Years

The S&P 500 index has averaged about 10% per year since inception in the 1920s.

Following very strong years in 2019, 2020, and 2021, the S&P 500 is off to a historically bad start to the year in 2022.

The Bad 1st-Half of 2022:

  • At -20.2% year-to-date, 2022 ranks as the third worst first-half of the year for the S&P 500 all-time and the worst first-half of the year since 1970.

  • The news with bonds isn’t any better. 10-year US Treasuries have had their worst start to the year since 1788.

  • Combined, this has been a historically bad first-half of the year for retirement savers.

The 2nd-Half (potentially good news?):

  • During the five previous worst first-half starts to the year, the S&P 500 was positive by at least 10% in the second-half of the year each time.

Worst 5 starts for S&P 500 Index | 1st-half vs. 2nd-half:

  • Year 1932: 1st-half -45% | 2nd-half +56%

  • Year 1962: 1st-half -22% | 2nd-half +17%

  • Year 1970: 1st-half -19% | 2nd-half +29%

  • Year 1940: 1st-half -17% | 2nd-half +10%

  • Year 1939: 1st-half -15% | 2nd-half +18%

This is a relatively small sample size and it’s certainly possible that markets continue falling, but this data reinforces the case to stay the course during bad periods like now.

While it can take some time, markets are likely to eventually recover and eventually continue onto new highs.

Further, some of the best periods in history tend to follow some of the worst periods. Staying the course ensures you’ll still be invested and will eventually benefit from the recovery when it arrives.

Having a well-organized investment plan specifically designed for your retirement can put you in a position to be able stay the course during particularly tough periods like now.

Investment Planning for Retirement:

The goal of the investment planning process for retirement is to provide you with investment income, when you need it, that lasts for the rest of your life. To accomplish this, a plan must be designed to protect you against four risks: stock market, inflation, liquidity, and longevity.

1 – The “short-term bucket” – This primarily includes bank accounts. This bucket provides liquidity and protection from stock market fluctuations.

2 – The “middle bucket” – This generally includes bond funds that primarily invests in US Treasuries. It may also include other fixed investments such as long-term CDs or annuities depending on your plan. This bucket is designed to provide some protection from stock market fluctuations, and also a slightly higher long-term expected returns than the short-term bucket.

3 – The “long-term bucket” – This includes quality, diversified stock funds. This bucket will fluctuate in value and will experience down days, months, quarters, and years from time to time. However, although it can take some time to recover during particularly bad periods like now, quality tends to be resilient and eventually bounce back. The purpose of this bucket is to provide the growth potential needed to fund a long retirement and address inflation, healthcare costs, and other items that may come up down the road. By keeping an appropriate amount in the short-term bucket and middle bucket (the “appropriate amount” is determined primarily by your unique investment income needs), you can position yourself to be able to avoid having to sell investments in your long-term bucket at bad times.

Maintaining a healthy balance between all three buckets helps protect you against the four retirement risks: stock market, inflation, liquidity, and longevity.

Having a well-organized retirement plan that provides you with the ability to stay the course is particularly important during tough periods like now.

Want To Discuss This Individually?

1 - For clients: Call or email me any time as always.

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This is article is for informational purposes only and should not be considered as tax or legal advice. Advice is only provided after entering into an Advisory Agreement with the Advisor. See other disclosure here: Disclosures

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Article Disclosures


Informational Purposes

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.


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