The first half of 2021 is over. Today I am going to review how stocks performed and what we should expect in the second half of 2021.
Global stocks had a very solid first half of 2021, closing at a new all-time high. In fact, the S&P 500 had its best first half in 23 years, since 1998. Here are the numbers.
- The S&P 500 (SPY) gained +18%.
- The NASDAQ 100 (QQQ) gained +17%.
- The Vanguard Global Stock Market (VT) gained +13%.
- Emerging Markets (EEM) gained +5%.
Take a look at the chart below.
Why Did Stocks do Well?
I see two key factors that led to the strong first half.
The COVID economic recovery is in play: The global and U.S. economies are experiencing a strong rebound from the COVID recession. A solid pace of growth for the U.S. economy is 3%. In the first quarter the U.S. economy grew at more than twice that pace. Here are some more details from the Associated Press.
The U.S. economy grew at a solid 6.4% rate in the first three months of the year, setting the stage for what economists believe may be the strongest year for the economy in about seven decades.
Growth in the gross domestic product, the country’s total output of goods and services, was unchanged from two previous estimates, the Commerce Department said Thursday, an acceleration from the 4.3% pace of the fourth quarter.
Trillion dollar COVID stimulus bills juicing stocks: Global governments all across the world have been pumping trillions in cash into the economy to stimulate more growth. For example, early in the year the U.S. passed a $1.9 trillion dollar stimulus bill to support the economy. This gave the global economy a boost, which is good for stocks, and some of this cash landed in the stock market which is good for stocks too.
What Should We Expect in the Second Half of 2021?
Looking forward global stocks are in position for a strong second half of the year because of three powerful catalysts that are directly on the horizon.
Strong momentum bodes well for stocks: History shows that when stocks have a strong first half of the year, they usually have a strong second half of the year. Here are some more details from CNBC.
Good first halves for the market usually bode well for the rest of the year. Whenever there has been a double-digit gain in the first half, the Dow and S&P 500 have never ended that year with an annual decline, according to Refinitiv data going back to 1950.
The COVID economic recovery will accelerate: According to the leading economic teams in the world, the COVID economic recovery will accelerate in the second half of the year. Here are some more details from Reuters.
The International Monetary Fund raised its 2021 U.S. growth projection sharply to 7.0% due to a strong recovery from the COVID-19 pandemic and an assumption that much of President Joe Biden’s infrastructure and social spending plans will be enacted.
The IMF’s latest forecast, marking the fastest U.S. growth pace since 1984, compares with an April projection of 4.6% growth in 2021. The Fund raised its 2022 U.S. GDP growth forecast to 4.9%, up from its previous 3.5% April forecast.
A fourth U.S. stimulus check on the way? I see a growing probability of another round of stimulus checks. While congress doesn’t have plans for a fourth stimulus check, an online petition has gained 4 million petitions. Here are some more details from Forbes.
In the ongoing campaign to get $2,000 a month stimulus checks, multiple Change.org petitions have collectively amassed nearly three million signatures. As reported by Newsweek, the petitions vary in scope, but they have a recurring theme: get a 4th stimulus check to the American people.
If congress passes another stimulus check that should give stocks another pop higher.
Here is the Plan for the Second Half of the Year
The plan for the second half of the year is to stay aggressive. That means holding most current investments, and looking to deploy more cash when the stock market is down.
Here is a list of the top sectors I will be targeting in the second half of the year.
- Energy stocks.
- Food stocks.
- Electric vehicle stocks.
- Clean/alternative energy stocks.
I’ll be back with another update next week – have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.