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Best first half for U.S. stocks since dotcom era 20-plus years ago

How to make the most of your investments

Wall Street's partying like it's 1997, with Friday's session marking the best first half of the year for U.S. stocks since the dawn of the dotcom boom 22 years ago. 

The S&P 500 stock index finished Friday up 17% year-to-date, while the technology-heavy Nasdaq composite gained 20.4%. The Dow was up 14%, around 3,250 points, to reach nearly 26,600 since Jan. 2, the start of the 2019 trading year.

Thanks to a June swoon that had Wall Street enthralled with stocks again, every major index closed out the month at least 6% higher. That's a sharp about-face from May, when traders fled to safer holdings because of increased anxiety over trade disputes and slowing global economic growth. The S&P 500 reached a record closing high on June 20 of 2,954, though it has retreated slightly from that mark.

Stocks also posted their second straight quarter of gains. The S&P 500 increased 3.4% in the second quarter but only after taking investors on a rollercoaster ride. It climbed steadily in April, dove in May and then climbed again in June. The index rose 13.1% in the first quarter.

Why investors are concerned about U.S.-China trade war

July could prove a different story. A wave of selling swept over the market for most of the final week of June as traders shifted money to less risky holdings like U.S. government bonds while remaining cautiously optimistic about this weekend's meeting in Japan between President Donald Trump and President Xi Jinping of China. It will be their first meeting since the trade war escalated following 11 rounds of negotiations.

Investors fear that a drawn-out trade war will crimp economic growth and corporate profits, and uncertainty over the impact of the conflict has thrown markets into a series of volatile swings. The dispute has prompted the Federal Reserve to say it is willing to cut interest rates if the dispute hurts the U.S. economy.

Trade-war induced volatility isn't going anywhere soon and investors are going to have to come to terms with that, said Kristina Hooper, chief global market strategist at Invesco.

"Investors need to recognize that the trade situation is unlikely to improve," she said. "The best we can hope for is an agreement to continue talks."

Many investors are hoping the talks put the world's two biggest economies on track to resolve their trade dispute, which has already led to hundreds of billions of dollars in tariffs imposed by both countries on each other's goods. 

"You've been seeing markets lean in this sort of optimistic direction on trade," said Brian Nick, chief investment strategist at Nuveen, noting that the possibility of a trade deal and a Federal Reserve rate cut have been priced into the market. "It's hard to see how we're actually going to earn our way higher from here."

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