Historically, the first two weeks of July have brought investors solace following a rough first half of the year.
After enduring a challenging first half of the year, investors may find some respite in the first two weeks of July if past performance is any indication of what the future holds in store.
Since reaching all-time highs in January, the value of the world’s stock markets has fallen by more than $20 trillion.
As policymakers fight to rein in skyrocketing inflation without stifling nascent economic development, the majority of the main markets are firmly established in the zone of bear markets.
According to the data that tracks half-month price fluctuations since 1930, the first two weeks of July have historically been the period during which investors in the S&P 500 have seen the highest gains of the year.
After the S&P 500 index has dropped by twenty percent since the beginning of the year and the S&P 500 equities have fallen in each of the past three consecutive quarters, some investors have stated that they are prepared to buy the dip. Since the beginning of the month, the S&P 500 index has gained 0.16 percent.
Despite the fact that volatility is still acting as a drag on global markets, a study conducted by JP Morgan found that the majority of investors plan to increase their equity exposure in the month of July.
Paul O’Connor, head of multi-asset at Janus Henderson Investors, stated that despite the gloomy environment for stocks, there are reasons for short-term optimism to be found in history.
“We are seeing record shorting, and we are seeing a pretty significant stock rebalancing taking place, most likely in Europe and the United States.
Because of the significant decline in the value of our equity holdings, it is only natural that we should rebalance our portfolio “he remarked.
According to estimates provided by BofA, another $5.8 billion was removed from global equity markets during the final week of June, with outflows from developed stock markets surpassing those from emerging market stock markets.
The first half of this year was a nightmare for anyone involved in the investment industry. Goldman Sachs analysts stated that a 60/40 portfolio strategy, which adheres to a standard portfolio technique of keeping 60 percent of its assets in equities and 40 percent in fixed income, posted its worst first-half return since 1932, which was a decrease of 17 percent. The strategy follows a standard portfolio technique of keeping 60 percent of its assets in equities and 40 percent in fixed income.
UBS advised clients to take advantage of the recent sell-off in market prices and increased volatility to develop longer-term positions selectively.
According to the Swiss bank, value stocks, such as energy and UK equities, might continue to outperform in an environment with high inflation, particularly if confidence increases that corporate earnings can remain resilient.
However, traders in the market recommend exercising care because they anticipate a turbulent few months ahead for risk assets due to rising interest rates and concerns about economic growth.
Fears of a recession and an increase in the cost of living are keeping people on edge, while a spike in the price of natural gas and a variety of economic indicators have rekindled concerns about the state of the global economy.
When asked about the situation, O’Connor stated, “The concern is that if we look beyond that (fortnight window), things do seem tricky.”
His team is planning to take advantage of any seasonal potential increase in July in order to sell into the rally.
Both UBS and Goldman Sachs suggested strengthening one’s defences against an impending economic downturn, which would result in lowered expectations for the profitability of businesses.