If the first six months of the year are any indicator, we could be in for a strong second half finish to 2021.
Since 1950, in years when the S&P 500 has been up more than 12.5% YTD at the end of June, the median return for the rest of the year has been 9.7%. Compare that to a 5.0% median return for all other years and there's reason to be optimistic.
History points to a strong finish. But what about current market indicators? We find reasons to be optimistic there as well: Strong corporate earnings, low interest rates, pent-up demand, and the big one, strong household savings. Earlier this year Morgan Housel explained how the decrease in personal spending due to COVID affected household balance sheets in 2021:
"The result is that the amount of cash households have in the bank has absolutely exploded. I don’t even know if that word does justice. American households have $1 trillion more in checking accounts today than they did a year ago. For perspective, they held $800 billion in checking accounts a year ago. So it’s more than doubled. In one year."
More money in the consumer's pocket tends to be a good thing for the economy and the stock market.
When you pair these current factors with the market's momentum so far this year, the second half of 2021 could look similar to the first.
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