Can The S&P 500 Make a Comeback in Q4?

The SPX is still on track for its sixth-straight quarterly win

Senior Quantitative Analyst
Sep 29, 2021 at 8:00 AM
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With the pullback in stocks recently, the most bullish time of the year couldn't come soon enough. Fortunately, this week starts the fourth quarter, which has historically been the best performing quarter for the S&P 500 Index (SPX). Since 1950, the last quarter of the year has averaged a return of 4%, with about 80% of the returns positive. The next best quarter is the first quarter, which averaged a return of 2.16% with 64% of returns positive. Since 2010, the index averaged over a 5% return in the fourth quarter. In the rest of the article, I'll share other noteworthy stats about the last three months of the year.

S&P 500 Q Returns 1950

Typical 4th Quarter Path

The chart below shows the average chart path for the S&P 500 in the fourth quarter. Eyeballing the chart, it seems to be a steady uptrend other than the middle part of November and the first half of December.  Overall, each of the three months has been positive on average.

S&P 500 Average 4th

6-Quarter Win Streak

As long as the SPX does not pullback 1.5% or more over the next couple of days, it will be six straight positive quarters for the index. This is the eighth streak of this length since 1950. The table below shows returns after these streaks. For comparison, the second table below shows typical returns for the index.

The numbers suggest that a six-quarter win streak is no reason to worry about the market being overextended. The next six months after six-straight positive quarters have averaged a gain of almost 8%, with all seven returns positive. The typical six-month figures for the S&P 500 has been a 4.61% return, with 68% of returns positive.

S&P 500 After 6-Quarter

Finally, here are the individual occurrences when the S&P 500 was positive six quarters in a row. The 70%+ gain during the current streak is the highest one of them all. The next highest return during the streak was the one that reached six quarters after the first quarter of 1955. That was an outstanding time to buy, with the SPX gaining almost 20% over the next six months, and gaining over 30% over the next year. It was the best return following any of these streaks. Hopefully, that's a good sign.

2_S&P 500 After 6-Quarter

                                         

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