10 Stocks Rally In The Second Half When Investors Need It Most

If you’re like most S&P 500 investors, you’re thankful the dreadful first half is over. But what matters more now is knowing which stocks do best in the second half.


Following a brutal first half that wiped away $11.5 trillion in shareholder value, says Wilshire Associates, S&P 500 investors might want to know 10 stocks tend to outperform in the second half. Those stocks that topped the S&P 500 in the second half for the past five straight years include technology firms Qualcomm (QCOM) and Paycom (PAYC) plus materials firm Sherwin-Williams (SHW), says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Not surprisingly, all 10 stocks are down this year.

It’s only natural that S&P 500 investors would want to forget the first half ever happened. The S&P 500 plunged 20.6%, making it the worst first six months to a year since 1970, says S&P Global Market Intelligence. But history tells investors to brace for more turbulence in the third quarter followed by some relief in the fourth.

“As for the second half, history says, but does not guarantee, that it may be a tale of two quarters,” said CFRA’s Sam Stovall. “Historically, (the third quarter) has been the most volatile and only the second average decliner (along with the second quarter) in the 16-quarter presidential cycle. However, (the fourth quarter along with the first two quarters of the following year) have been the strongest of all 16 quarters.”

S&P 500 Investors Hope For Improved Market

The S&P 500 couldn’t catch a break in the first half. If something could go wrong, it did.

Skyrocketing inflation. An aggressive Federal Reserve rate hiking campaign. Odds of a recession rising. And war in Europe. All these factors tortured stocks in the first quarter. And poor sentiment going into the third quarter is pretty typical, Stovall said. The S&P 500 dropped in the second quarter during the 16-month presidential cycle. Not only that, but eight of the 11 S&P 500 sectors and 86% of sub-industries also fell.

“This year, despite a likely near-term relief rally, stocks should again feel pressure from an expected slowdown in economic activity, resulting in a reduction in EPS growth projections,” Stovall said.

But on the bright side, the fourth quarter is one of the strongest in the 16-month cycle, Stovall said. Additionally, new S&P 500 bull markets tend to start three months after the end of the bear. This current bear market started on Jan. 3, 2022.

All told, the second half is usually pretty strong. The S&P 500 gained an average 8.9% in the second half in the past five years. And it only fell in one of those periods, by 7.9%, in the second half of 2018.

Which S&P 500 Stocks Do Best In The Second Half?

Technology stocks tends to show up most often in the top 10 of the S&P 500 in the second half. Four of the 10 stocks to top the S&P 500 in the second half of every year in the past five are in technology.

Take Qualcomm, home of one of the most prolific inventors in the world. Shares of the telecom company shot up nearly 26%, on average, in the second half of the past five years. It even gained more than 1% in the second half of 2018, when the S&P 500 fell. It’s a similar story with software firm Paycom. Shares shot up by an average 23.7% in the second half in the past five years.

To be sure, given the historical ugliness of the first half, the second half may not follow the rules. But it’s good to know that at least some S&P 500 stocks have a good track record at ending the year on a high note.

Top 10 Second Half S&P 500 Stocks

All outperformed the S&P 500 from July to December in the past five years

Company Symbol YTD % ch. Sector Avg. second-half stock gain past five years Qualcomm (QCOM) -28.8% Information Technology 25.7% Paycom Software (PAYC) -32.5 Information Technology 23.7 EPAM Systems (EPAM) -55.9 Information Technology 23.3 Sherwin-Williams (SHW) -36.4 Materials 19.4 Costco Wholesale (COST) -15.7 Consumer Staples 18.6 Intuitive Surgical (ISRG) -44.2 Health Care 18.1 NextEra Energy (NEE) -17.0 Utilities 17.9 Dover (DOV) -33.2 Industrials 17.8 Amphenol (APH) -26.4 Information Technology 17.8 Alphabet (GOOGL) -22.9 Communication Services 14.4 Sources: IBD, S&P Global Market Intelligence Follow Matt Krantz on Twitter @mattkrantz


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