The first half of 2022 was one for the record books, but it was more dubious than distinguished. Only two years (2020 & 2009)  in the past quarter century experienced more 1% moves in the first half than did 2022 and only one (2008) finished the year with a higher percentage of 1% moves than we have experienced in the first half of this year. Both stocks and bonds were down in back-to-back quarters for only the third time in the past 45 years. This contributed to the benchmark 60/40 stock/bond portfolio experiencing a first half of the year that was twice as bad as another in the past quarter century. According to data from Ned Davis Research, it was the worst first half for a balanced portfolio since the 1930’s.

There are plenty of observations about how the worst first halves are followed by strength in the second half and ample evidence that stocks tend to bottom prior to mid-term elections and then rally in their wake. Looking back through history, we anchor to the darkest days and see the daylight that follows. It is certainly true that sometimes bad periods have been followed by better periods, but other times they have been followed by worse periods. When both stocks and bonds have been down two quarters in a row in the past, the S&P 500 was all over the place in the quarter that followed: +12% in Q2 1980, +6% in Q4 1981, -22% in Q4 2008.

Because it’s been bad doesn’t mean it’s about to get good. Because the market has survived these periods of turmoil does not mean that investors have emerged unscathed, either financially or emotionally.