The S&P 500 is about to enter its strongest quarter of the year historically, this chart shows

Bespoke Investment Group highlights that the S&P 500, currently up 13% year-to-date, is entering its historically strongest quarter. Since 1928, the fourth quarter has averaged a 2.9% gain, but when the index had year-to-date gains through Q3, Q4 returns averaged 4.4% with gains 83.1% of the time. This historical pattern suggests a strong potential for continued equity market performance through year-end.

Analysis

The S&P 500 is positioned for a seasonally strong fourth quarter, supported by significant year-to-date gains of approximately 13%. Historical analysis from Bespoke Investment Group indicates that since 1928, the index's average Q4 return of 2.9% is amplified to 4.4% in years when it was already positive through the first three quarters, with gains occurring 83.1% of the time under such conditions. This historical tailwind is occurring alongside a supportive macroeconomic backdrop, characterized by the Federal Reserve's recent resumption of its rate-cutting cycle and robust economic data, including an upwardly revised Q2 real GDP growth rate of 3.8%. However, a key near-term risk is a potential U.S. government shutdown, which could disrupt the release of the upcoming employment report—a critical data point influencing the Fed's monetary policy decisions and future rate cuts.

Key Decisions for Investors

• Given the strong historical data for Q4 performance following a positive YTD return, investors may consider maintaining a constructive to bullish allocation to broad U.S. equities.
• Investors should closely monitor developments related to the potential government shutdown, as a delay in key economic data like the employment report could introduce significant uncertainty and volatility.
• The Federal Reserve's policy path remains a primary driver, so attention should be paid to any shifts in central bank rhetoric or economic indicators that could alter the outlook for continued rate cuts.