The record-setting first half of 2021 paves the way for the S&P 500 to return 10% by the end of the year, LPL Financial says

• The S&P 500 index finished the first half of 2021 up by 14.4%.
• The first-half gain sets up the index to land a potential return of 9.7% in the second half of the year, says LPL Financial.
• July is historically a good month for stocks but the third quarter tends to be rough for the market.

The second half of 2021 holds the potential for a strong return for the S&P 500 after a strong first six months pushed the gauge above a historically favorable threshold, according to one equity strategist.

The index rose by a hefty 14.4% from the start this year through Wednesday which marked the end of the second quarter. When its advance is greater than 12.5% in the first six months of a year, the S&P 500 usually records a median return of 9.7%, which is nearly twice the median return of 5% for any given year, according to LPL Financial.

A "good start to a year is usually a good sign for the rest of the year," said Ryan Detrick, chief market strategist at LPL, in a note published Thursday, the first trading day for the second half of 2021. The S&P 500 rose during Thursday's session after closing at a fresh record on Wednesday at 4,297.50.

The index in April cracked through the 4,000 level for the first time, continuing its push higher after a March 2020 crash triggered by recession fears stemming from the COVID-19 crisis.

So far this year, energy has been the best performing of the index's 11 sectors, rising more than 40% as the oil market recovers from a slash in demand and a supply glut. Financials have gained roughly 24% for the second-best sector performance.

The information technology group, which has been rocked this year in part by concerns about rising borrowing costs, has managed to pick up about 13%. The utility sector has logged the smallest rise of nearly 1%.

"July is usually strong," for the S&P 500, and during a post-election year, it is the best month of the year as it has gained 2.2% on average since 1950, said Detrick. "It is August and September you need to worry about," he said in pointing out that the third quarter is usually the worst quarter of the year.

"The good news though is the weak performance opens the door to the historically very strong fourth quarter," he said.