October may have a bad reputation, but the fourth quarter has mostly been a positive time for stocks. Despite worries about central bank tightening, the debt ceiling, Chinese developer Evergrande and Covid-19, many strategists expect stocks to eclipse recent highs after a rocky period in October.
The S&P 500 has averaged outsized gains of 3.9% in the fourth quarter and was up four out of every five years since World War II, according to CFRA. The next best quarter is the first, with an average gain of 2.3%. The worst is the third, up just 0.6%.
One of the first hurdles markets face in the new quarter is Friday’s employment report, potentially one of the final triggers for the Federal Reserve’s decision on when to taper its $120 billion-a-month bond buying program.
Earnings have been a big catalyst for the stock market, with huge upside surprises boosting sentiment this year. But some strategists warn that if companies sound too cautious when they report third-quarter profits in the next couple of weeks, that could be a forewarning for the market.
