For successful online stock trading, it does benefit to have a forecast of the likely future condition of the market. But after a turbulent first half with highs and lows, predicting the second half of 2015 has become next to impossible.
Analysts believe the direction of the stock market in the second half of this year could be quite unpredictable. In other words, it means the US stock market has as much of a chance of soaring as it has of plunging.
Market Swings Could Continue
Obviously that indicates good news as well as bad news since, on the one hand, the market has a chance of not having to go through the shocking swings it experienced in the first half. But it also means that there is no guarantee that the stock market would perform better than it has in the first half of the year. This analysis comes after studying the historical relationship between the first half year performance of the stock and the second half which has mostly been random.
That the stock market has had an up and down rollercoaster in the first half of the season can’t be argued. After having perhaps the worst ever start in US history to a calendar year, we saw the Dow Jones industrial average rising 4% over where it started. But in late June the market again experienced a slump, as a result of the global Brexit vote referendum shock among investors. But the market bounced back again and ended the first half of the 2016 calendar year on a high.
Be Prepared for Volatility
Now, at the halfway point, we find the Dow up 2.9% while the NASDAQ is at a 2.6% loss. On observing the historical relationship between the first and second half of a calendar year, one can say that the only conclusion could be that this up and down movement is set to continue. It is also important to remember that highly volatile periods usually come clustered together. So it makes sense to brace yourself and be prepared for such volatility as the second half of 2016 begins.
Looking for patterns in the first half and second half stock performance relationship could provide an improved understanding of the functioning and behaviour of stock markets in general terms. And it is because the stock market looks forward and not backward that the second half performance of the market only has a random relation to the first half returns.
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