The S&P 500 Index was down -19.4% in the first three months of this year. It then gained +21.6% in the next three months plus, leading into the July 4th holiday, leaving the index down -2.1% for the year. That is a great example of stock market volatility, and while the first half of this year may have been a bit extreme in both directions, we lay out below our reasoning for the likelihood of more of it to come.
But first, let’s address why stocks bounced back so strongly given all of the negative headlines, virus cases, job losses, potential bankruptcies, etc. One reason is simply that the Fed stepped in with fiscal and monetary stimulus programs that were massive, to say the least. Monetary stimulus calmed the bond market, which then helped stabilize the stock market, and fiscal stimulus sent the added message that the Fed will support the consumer and the economy. Investors yelled “don’t fight the Fed”, and stocks rallied.

So where do we go from here? Well, however optimistic or pessimistic you are for the near term, you probably have company. The chart below shows that even the “experts” really don’t know what to expect from the market over the next two quarters i .