August 16, 2022

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If the date repeats itself, the shares will expire briefly in July

If the date repeats itself, the shares will expire briefly in July

LONDON (Reuters) – If history is any indication for the future, the first two weeks of July may bring relief to investors beyond the first half of the year.

The value of global stocks has fallen by more than $20 trillion since hitting record levels in January.

Most major markets are firmly entrenched in bear market territory as policy makers struggle to control high inflation without crushing nascent growth.

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However, half-monthly price changes since the 1930 numbers show that the first two weeks of July have historically provided the best returns of the year for the S&P 500. (.SPX) investors.

After three consecutive quarters of declines for the S&P 500, with the index down 20% since the start of the year, some investors said they were ready to buy on the dip. The S&P 500 is up 0.16% so far this month.

While volatility continues to be a drag on global stocks, a JP Morgan poll showed that two-thirds of investors are likely to increase their exposure to their stocks in July.

History provides a ground for short-term hope amid a bleak backdrop for stocks, said Paul O’Connor, head of multiple assets at Janus Henderson Investors.

“We’re seeing record short selling, and we’re seeing a really big rebalancing in equities, probably…in Europe and the US. And it’s only natural that we rebalance because we’ve seen such a big drop in equities,” he said.

Figures from Bank of America showed that in the last week of June, another $5.8 billion left global equities, with outflows from developed stock markets outpacing emerging markets.

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no place to hide

The first six months of the year were tough for investors. Goldman Sachs analysts said the 60/40 portfolio strategy, which follows the standard portfolio approach of holding 60% of its assets in equities and 40% in fixed income, posted the worst first-half return since 1932, down 17%.

UBS suggested using stock sell-offs and volatility to selectively build long positions.

In a high inflation environment, the Swiss bank said valuable stocks including energy and British stocks (.FTSE) It could continue to outperform, especially if confidence rises that corporate earnings can remain resilient.

But market participants are advising caution, expecting a stormy few months for risky assets, amid rising interest rates and economic growth concerns.

Fears of economic recession, rising cost of living keep consumers cautious, while rising natural gas prices and a slew of economic indicators have reignited concerns about the health of the global economy.

“The problem is that if we look beyond this (two-week window), things look tough,” O’Connor said. His team will use any potential seasonal spike in July to sell off the spike.

Both UBS and Goldman Sachs recommended building defenses against a possible economic recession, which could dampen corporate earnings expectations.

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(Joyce Alves reports). Editing by Jason Neely

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