July Market Commentary
2022 has been the worst start to a year for bonds and the 3rd worst start to a year for stocks. The first 6 months of 2022 had a bond return of -10.4%. The next three worst starts were in 1994 (-3.9%), 1974 (-2.8%), and 2013 (-2.4%). The following 6 months for these years were all positive for the bond market. The next 6 months had bond market returns of 1.0% in 1994, 8.7% in 1974, and 0.4% in 2013. The first 6 months of 2022 had a stock return of -20.0%. The first and second worst starts were in 1932 (-43.3%) and 1962 (-22.3%). The following 6 months for these two years were both positive for the stock market. The next 6 months had stock returns of 62.0% in 1932 and 17.4% in 1962.
Volatility is picking up in 2022. For the first six months of 2022, there were 26 single day stock market returns of +/-2% or more. In comparison, in 2021 there were 7 of these days, in 2020 there were 44 of these days, and in 2019 there were 7 of these days. Since 2001, there have been three years with 0 single day stock market returns off +/-2% or more. These years are 2004, 2005, and 2017. There were 680 days without a 2% trading day from 10/2/03-6/14/06 and 310 days without a 2% trading day from 11/8/16-2/1/18.
U.S. stock performance has differed across election cycles. The average annual return from 1/1/1926-6/30/22 for all years is 12.3%, for presidential election years is 11.6%, for mid-term elections is 8.6%, and for non-election years is 14.6%. For all of these years, the first and second 6 months have differences in returns. For instance, for all years, the first 6 months have an average return of 5.5% while the second 6 months have an average return of 6.4%. For presidential election years, the first 6 months have an average return of 2.8% while the second 6 months have an average return of 9.3%. For mid-term elections, the first 6 months have an average return of 0.3% while the second 6 months have an average return of 7.1%. For non-election years, the first 6 months have an average return of 9.4% while the second 6 months have an average return of 4.5%.
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