The S&P 500 (^GSPC +0.59%) may be in the process of setting up for strong gains in the second half of the year. Since 1990, there have been 15 occasions where the index was up more than 5% by June 1. In 14 of those years, the S&P 500 was also up in the second half. The median second-half return in those years was 12.7%.
The index entered June 2026 up 7.7%, making it the 16th qualifier for this setup. The sharp decline on June 5 may have shaken investor confidence regarding where the market might go from here. But if you pull back the lens and look at total returns so far this year, positive momentum is still intact.
History suggests that investors would be making a mistake selling their stocks here.
Image source: Getty Images.
The S&P 500 could be in for a strong second half
Both short-term and long-term signals are looking positive here. Since 1990, the S&P 500 has experienced 107 sessions with a single-day decline of more than 3%. Historically, that's actually been a good sign more often than not. The median 21-day forward return following those days: 2.1%. Investors could be viewing these as buy-the-dip opportunities.
If you want to get a bit more granular, let's look at June trading days since 1990 where the S&P 500 fell by more than 2%. Following those 23 instances, the median 21-day forward return was 3.8%. The median 63-day return was 5.9%. It's not a huge sample size, but there is some potential signaling here.
A 93% success rate
The stronger signal, though, is the full-year setup. Here are the 15 years since 1990 when the S&P 500 was up more than 5% by June 1, along with what the full first and second halves of the year looked like:
| Year | First-Half Return | Second-Half Return | Full-Year Return |
|---|---|---|---|
| 1991 | 18.9% | 7.5% | 27.8% |
| 1995 | 16.2% | 15.5% | 34.2% |
| 1996 | 7.6% | 10.9% | 19.3% |
| 1997 | 14.8% | 14.7% | 31.7% |
| 1998 | 11.9% | 12.7% | 26.1% |
| 1999 | 5.4% | 13.5% | 19.6% |
| 2003 | 6.4% | 15% | 22.3% |
| 2007 | 8.5% | (4.4%) | 3.7% |
| 2013 | 12.2% | 12.7% | 26.4% |
| 2014 | 5.1% | 7% | 12.4% |
| 2017 | 7.6% | 10% | 18.4% |
| 2019 | 9.3% | 17.7% | 28.7% |
| 2021 | 13.5% | 13.4% | 28.8% |
| 2023 | 10.4% | 13% | 24.7% |
| 2024 | 11.4% | 11.3% | 24% |
| 2026 | 7.7% | ? | ? |
Data source: Yahoo! Finance.
That's 14 out of 15 positive second halves, which is a 93% success rate. The lone exception was 2007, when the housing crisis nearly blew up the entire financial sector. That's not what's happening today. Bank balance sheets are well capitalized, credit spreads are still narrow, and there's no structural equivalent to the shadow banking leverage that nearly broke the entire system.
The two most comparable recent setups are 2023 and 2024. Both years saw first- and second-half returns come in nearly identical, with full-year gains around 24% each.
This is a good buying opportunity for the S&P 500
In my opinion, the S&P 500 is in a buying opportunity, not a warning. Investors holding index exposure through funds like the Vanguard S&P 500 ETF (VOO +0.61%) or the iShares Core S&P 500 ETF (IVV +0.60%) have history working in their favor if they stay put through the summer. Selling into seasonal weakness in a "strong start" year has historically resulted in underperformance later in the year.
