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The S&P 500 (NYSEARCA:SPY) has fallen 10% from its high on April 2, and is now up 1.6% for the year (The Dow is down (0.8)% and the NASDAQ is up 5.5%). This has been driven by a combination of concerns about Europe, disappointing economic data in almost every major country in the world (especially the U.S., China, Germany, UK, Spain, France, India and Brazil) along with increasing awareness of higher taxes and mandated spending cuts in the U.S. starting January 1, 2013 (which may be addressed but not until after the elections).

Over the prior 12 years (2000 to 2011) and 47 of the past 50 years at some point during the year the S&P 500 has closed lower than when it started the year. In the 2000 to 2011 time frame the range is (2)% in 2006 to (50%) in 2008 (see table below).

Note that of the past 50 years, 16 of the lower closes were in January, so if you remove them - since many were in the first week or two - it makes the analysis less skewed since 31 of 50 years the S&P 500 closed lower than at the start of the year.

From an article in Saturday's Wall Street Journalthe S&P 500's June quarter earnings are projected to increase 4.3% per FactSet. However, if Bank of America's (NYSE:BAC) earnings are removed the earnings growth rate is projected to fall (0.5)%. Also it would not surprise me that if Apple's (NASDAQ:AAPL) earnings are removed that the S&P 500's earnings would decrease between (2.0)% and (3.0)%. Obviously if June quarter's earnings growth is negative this would not be good for the market.

While it is very difficult to time the market and a lot of these negatives have already impacted stocks I believe some additional caution is warranted.

I do not believe the market has fully discounted

  • Worldwide growth continuing to deteriorate
  • Bank runs accelerating in Europe
  • Rhetoric about Greece exiting the euro increasing (note upcoming June 17 elections)
  • The problems in Spain continue to compound or
  • Something like Cypress needing bailout funds is required

Below is a table of the past 50 years of trading in the S&P 500 showing the prior year's close, its low close during the year, which month it occurred and the percentage delta.

S&P 500

Prior Year

Low

Low

% Below

Year

Dec. 31

Intra-day

Month

Start of Year

2012

1257.60

June 1

1.6%

2011

1257.64

1074.77

Oct.

(15)%

2010

1115.10

1010.91

July

(9)%

2009

903.25

666.79

March

(26)%

2008

1468.36

741.02

Nov.

(50)%

2007

1418.30

1363.98

March

(4)%

2006

1248.29

1219.29

June

(2)%

2005

1211.92

1136.15

April

(6)%

2004

1111.92

1060.72

August

(5)%

2003

879.82

788.90

March

(10)%

2002

1148.08

768.63

Oct.

(33)%

2001

1320.38

944.75

Sept.

(28)%

2000

1469.25

1254.07

Dec.

(15)%

1999

1229.23

1205.46

Jan.

(2)%

1998

970.43

912.83

Jan.

(6)%

1997

740.74

729.55

Jan.

(2)%

1996

615.93

597.29

Jan.

(3)%

1995

459.27

457.20

Jan.

(0)%

1994

466.45

435.86

April

(7)%

1993

435.71

426.88

Jan.

(2)%

1992

417.09

392.41

April

(6)%

1991

330.22

309.35

Jan.

(6)%

1990

353.40

294.51

Oct.

(17)%

1989

277.72

273.81

Jan.

(1)%

1988

247.08

240.17

Jan.

(3)%

1987

242.17

216.46

Oct.

(11)%

1986

211.28

202.60

Jan.

(4)%

1985

167.24

163.36

Jan.

(2)%

1984

164.93

147.26

July

(11)%

1983

140.64

138.08

Jan.

(2)%

1982

122.55

102.20

August

(17)%

1981

135.76

123.28

Oct.

(9)%

1980

107.94

94.23

March

(13)%

1979

96.11

96.73

Jan.

1%

1978

95.10

86.45

March

(9)%

1977

107.46

90.01

Nov.

(16)%

1976

90.19

90.90

Jan.

1%

1975

68.56

68.65

Jan.

0%

1974

97.55

60.96

Oct.

(38)%

1973

118.05

91.05

Dec.

(23)%

1972

102.09

100.87

Jan.

(1)%

1971

92.15

89.34

Nov.

(3)%

1970

92.06

68.61

May

(25)%

1969

103.86

88.04

July

(15)%

1968

96.47

86.73

Feb.

(10)%

1967

80.33

79.43

Jan.

(1)%

1966

92.43

72.28

Oct.

(22)%

1965

84.75

80.73

June

(5)%

1964

75.02

74.82

Jan.

(0)%

1963

63.10

62.32

Jan.

(1)%

1962

71.55

51.35

June

(28)%

Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.

Source: The S&P 500 Could Go Negative For The Year - Analysis Of The Previous 50 Years