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Fourth Quarter Typically Positive for Stocks

In theory, investors can breathe easier heading into the fourth quarter, when markets typically post the strongest returns of the year. To draw this conclusion, we analyzed data collected on S&P 500 performance from 1980-2022. By our calculations, the quarter has generated average gains of 4.6%, compared to gains of 2.1%, 2.9%, and 0.3% for 1Q, 2Q and 3Q, respectively. The fourth quarter is consistent as well, with a "win percentage" of 81%. This means that stock returns are positive in the fourth quarter in four years out of five, and compares to winning percentages of 66% in 1Q, 66% in 2Q, and 61% in 3Q. To be sure, the fourth quarter has had its share of clunkers. In 1987, which included Black Friday, stocks fell 23% during the period; in 2008, stocks sold off 18%, after the collapse of Lehman Brothers and as the U.S. economy plunged into a deep recession. As recently as 2018, stocks slid 14% in the final quarter, when trade wars intensified and the Federal Reserve raised rates. But last year, when stocks were in a bear market, 4Q was the only quarter of the year with a positive performance (up 7%). This time around, it is not unreasonable to expect a slow start, given the government shutdown, labor strikes at automakers, oil prices above $90 per barrel, and high interest rates. In the current environment, we continue to recommend that clients focus on quality companies with clean balance sheets and experienced management teams. ...  quarter in four years out of five, and compares to winning percentages of 66% in 1Q, 66% in 2Q, and 61% in 3Q. To be sure, the fourth quarter has had its share of clunkers. In 1987, which included Black Friday, stocks fell 23% during the period; in 2008, stocks sold off 18%, after the collapse of Lehman Brothers and as the U.S. economy plunged into a deep recession. As recently as 2018, stocks slid 14% in the final quarter, when trade wars intensified and the Federal Reserve raised rates. But last year, when stocks were in a bear market, 4Q was the only quarter of the year with a positive performance (up 7%). This time around, it is not unreasonable to expect a slow start, given the government shutdown, labor strikes at automakers, oil prices above $90 per barrel, and high interest rates. In the current environment, we continue to recommend that clients focus on quality companies with clean balance sheets and experienced management teams.   more

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