The first half of 2023 surprised just about everyone…
We saw worries of a recession hold steady… a handful of the largest bank failures in U.S. history… and a Federal Reserve that kept hiking interest rates.
Despite all those headwinds, U.S. stocks have soared. The S&P 500 Index was up 17% in the first half of the year. And we’ve only seen one other first half with gains of that level since 1998.
What’s interesting, though, is that this strong performance hasn’t made most investors giddy. They’re still worried about the dark clouds on the horizon. But according to history, they shouldn’t be overly bearish for long.
That’s because the S&P 500’s performance in the first six months of this year was uniquely good. And it means the good times will continue… and that stocks could reach new highs this year.
We could even see total upside of 19% over the next 12 months. And that means you want to own stocks today.
Let me explain…
First-half gains of 15% aren’t common. They’ve only happened 10 other times since 1950, or about once every seven years.
Today’s situation is even more rare, though. That’s because the market lost money last year… then turned it around for a 15%-plus gain in the first half of 2023.
That kind of recovery almost never happens. We’ve only seen four other instances in the past 73 years. But it’s happening right now. Take a look…
The S&P 500 has staged an incredible rally after last year’s pain. The overall losses from 2022 were 18%. And we’ve already made up for most of them so far this year.
On top of that, stocks only need to rise another 8% to hit new highs. And that’ll likely happen in 2023, according to this extreme.
To see it, I looked at every instance where stocks were down one year and followed with a 15%-plus gain in the first half of the next year. That has only happened four other times since 1950. And those instances led to impressive forward returns. Check it out…
Stocks have returned a solid 7.9% per year since 1950. But you can do much better than that buy-and-hold return. You just have to buy at the right time.
Buying after similar setups led to 9.7% gains in six months and 18.9% gains over the next year. Fantastic returns like these show the power of investing with the trend in your favor.
Even more, if we see a 9.7% gain to finish the year, U.S. stocks will have hit new highs. Back in January, few would have thought this possible. But today, it’s more than a possibility… It’s darn likely.
You might still feel uneasy about putting money to work. But you don’t want to let fear keep you on the sidelines while everyone else starts racking up big profits.
History is clear as day on this situation… The trend is up. And we want to bet on higher prices right now.
Good investing,
Brett Eversole
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Source: Daily Wealth