Global equity markets surprised investors in a positive away, with the MSCI ACWI Index posting a 13% return in the first half of the year. ¹ In the US, the NASDAQ 100 posted its highest ever first-half return of 39%. ² After a difficult 2022, expectations of a recession put investors on the backfoot for 2023, but the economy remained resilient and equity markets recovered. Now, recession fears linger and hawkish monetary policy by major central banks casts doubt on performance in the second half of the year. In this article we will analyze the returns of various stock market indices in the first and second half of the year and look at some key statistics.

The NASDAQ 100

The NASDAQ 100 indeed had the best first half of the year ever with a return of 38.75%, surpassing the 34.97% it had in 1998 during the dotcom bubble. What does this mean for the second half of the year? At the end of the 1990s (more precisely between 1995 and 1999) the NASDAQ 100 was positive in both the first and second halves. More specifically, in 1998, when it posted its highest ever return in the first half, it enjoyed an even higher return of 37.29% in the second half. So, if we replace dotcom with AI in the name of the bubble, we could see a very strong second half for the NASDAQ 100.

Source: Yahoo Finance. Period: 1/1/1986 - 6/30/2023. Past performance is not a reliable indicator of future performance.

Unlike what happened in 1998, the average statistics show a different picture. The NASDAQ 100 has had a higher average return in the first half of the year than in the second (8.47% vs. 7.49%), as shown in the chart below. In addition, in the years it returned over both 10% and 15% in the first half of the year, the average return of the NASDAQ 100 in the second half of the year has been lower than in the first half .

Source: Yahoo Finance. Period: 1/1/1986 - 6/30/2023. Past performance is not a reliable indicator of future performance.

The difficult question now is whether we are in a normal year (average) or whether we are really entering a bubble (like the dotcom years). As you can see from the first chart, returns were extremely high in the second half of both 1998 and 1999.

What about the market as a whole? Was this also the best first half of the year for the S&P 500® Index?

S&P 500® Index

With a return of 15.91%, the S&P 500® Index had an above-average first half of 2023 (average: 4.49%), but was still far from its highest return of 38.84% in 1975. However, in the case of the S&P 500® Index, the strong first half of 1975 did not translate into good returns in the second half of the year, as the index fell by 5.25%.

Source: Yahoo Finance. Period: 1/1/1943 - 6/30/2023. Past performance is not a reliable indicator of future performance.

In terms of statistics, it is interesting to note that the first and the second halves of the year for the S&P 500® Index produced, on average, similar returns of 4.49% and 4.46%, respectively. When returns exceed 10% and 15% in the first half of the year, the average return in the first half of the year is higher than in the second half. This result is in line with that of the NASDAQ 100.

Source: Yahoo Finance. Period: 1/1/1943 - 6/30/2023. Past performance is not a reliable indicator of future performance.

In the following section, we shift our focus to a global viewpoint by examining the MSCI ACWI Index, which currently consists of big and mid-cap stocks from 23 developed markets and 24 emerging markets countries.

MSCI ACWI Index

To analyze the returns of the MSCI ACWI Index, I had to resort to an ETF because the index returns are not available in Yahoo Finance. In that sense, I will use the returns of the iShares MSCI ACWI ETF (ticker: ACWI).

In the first half of 2023, the MSCI ACWI index posted remarkable gains of 13.03%, just missing the record 14.88% in 2019. Due to the index’s recent history, it is a bit more difficult to evaluate its performance. Unfortunately, neither performance during the dotcom bubble nor during the Great Financial Crisis is available.

Source: Yahoo Finance. Period: 1/1/1986 - 6/30/2009. Past performance is not a reliable indicator of future performance. * MSCI ACWI Index represented by iShares MSCI ACWI ETF (ACWI).

Again, the short history makes it harder to draw any conclusions from the statistical graph. In any case, it is clear that, on average, the MSCI ACWI Index performs better during the second half of the year than it does in the first. This is different from what the NASDAQ 100 and S&P 500® Index have shown, but the time frame available for these two indices was significantly different. Moreover, the MSCI ACWI Index has not achieved returns in the first half of the year of more than 15% in any year during the last decade. If we re-visit the previous chart, we see that this was not the case for the second half of the year as there are four instances where returns exceeded 15%. It really seems there has been some kind of dynamic change in the second half of the year in global equities during the last decade, so let’s see what 2023 has on offer for the next six months!

Source: Yahoo Finance. Period: 1/1/1986 - 6/30/2009. Past performance is not a reliable indicator of future performance. * MSCI ACWI Index represented by iShares MSCI ACWI ETF (ACWI).

Final Notes

I also decided to run this analysis for the Euro Stoxx 600® Index for my European friends. Leave your assessment in the comment section below!

Source: Yahoo Finance. Period: 1/1/2005 - 6/30/2023. Past performance is not a reliable indicator of future performance.

Source: Yahoo Finance. Period: 1/1/2005 - 6/30/2023. Past performance is not a reliable indicator of future performance.

Sources

¹ Source: Yahoo Finance as of June 30, 2023. MSCI ACWI Index represented by iShares MSCI ACWI ETF (ACWI). Past performance is not a reliable indicator of future performance.

² Source: Yahoo Finance as of June 30, 2023. Past performance is not a reliable indicator of future performance.

Data Source:

Yahoo Finance

Code Source: GitHub Page

Cover Image Credits: © OpenClipart / ID: 97495 / freesvg.org

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