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In my last blog post written just over three months ago, I discussed the S&P 500’s notable Q1 return and its historic five-month return. Historically, both indicated that a strong Q2 return was likely. Fast-forward three months and the S&P 500 posted a Q2 return of 3.92 percent.
Given that Q2 is now behind us, let’s explore half-year return data, Q2 return data for both the S&P 500 and the Nasdaq Composite, and some historical election year data.
Spotlight on the S&P 500
First, let’s view the S&P 500 in isolation. At the end of June, the S&P 500 was up 14.48 percent year-to-date (YTD). This marks the 24th time since 1950 when the S&P 500 was up more than 10 percent halfway through the year.
Looking at the previous 23 years and their return data (see below), we can take away that, on a shorter-term basis, there is more uncertainty when it comes to returns. But performance over the remainder of the year looks more positive, with more than 80 percent of those 23 years posting a positive six-month return.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
S&P 500 + Nasdaq
Now let’s incorporate the Nasdaq, which was up 18.13 percent at the end of June. Since 1973 (two years after Nasdaq inception), there have been 15 years (including 2024) where the S&P 500 was up more than 10 percent YTD and the Nasdaq was up more than 15 percent YTD, six months into the year.
A key takeaway with these returns is that the three-month return for both indices is less than optimal, with less than 50 percent of those instances for each index posting a positive return. But returns improve on a 6-month basis and even more so on a 12-month basis.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
Quarterly returns. I’m likely getting a bit repetitive, but when I analyze technicals and price action and compare them to similar historical situations, I do my best to view multiple angles to find data that could present a different conclusion.
Moving on, as stated earlier, the S&P 500 returned 3.92 percent during Q2, while the Nasdaq Composite posted an even more impressive 8.26 percent return. Since 1973 (two years after Nasdaq inception), there have been 19 years (including 2024) where both the Nasdaq and the S&P 500 posted positive returns in both Q1 and Q2.
The chart below shows the historical return data for those prior 18 instances. Again, we see the same story: Q3 returns paint an uncertain picture, while Q4 and six-month returns are a bit rosier.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
Election Year Data
Since 1950, we have had 18 elections (excluding 2024). The chart below shows the historical Q3, Q4, and six-month returns for the S&P 500 during those 18 election years. You wouldn’t believe it, but it is more of the same. The three election years having negative six-month returns are 2008, 2000, and 1956.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
Getting even more granular, let’s look at the historical monthly returns (July–December) for each of those 18 instances. To be clear, I am not trying to present this data to show how someone should decide when to buy and/or sell. Rather, I want to illustrate that other than the month of December, there tends to be a high degree of monthly price uncertainty and, leading up to the actual election itself, one should expect price volatility.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
Finally, let’s look at election years since 1950 where the S&P 500 posted positive returns during both Q1 and Q2. This narrows down the number of years to seven (excluding 2024). Again, it is more of the same. Four of those years posted a positive Q3 return, while all seven years posted a positive Q4 return and a positive six-month return.
Source: Data from Tradingview. The table reflects index price returns excluding dividends. Past performance is no guarantee of future results.
Reasons for Cautious Optimism Despite Short-Term Volatility
I presented a lot of historical data today. Each historical scenario shows that volatility could exist in Q3 but that the outlook for the remainder of the year appears positive. In the end, and as always, historical price returns are far from a guarantee of future price returns.
