Q4 ’monster’ rally to drive the S&P 500 to 7100 by year-end: strategist

The Stock Traders Almanac predicts a "monster Q4 rally" for the S&P 500, projecting the index to reach 7100 by the end of 2025. This bullish outlook is driven by the unexpected resilience against bearish seasonality and the S&P 500's eight new all-time highs in September, a historical precursor to strong fourth-quarter performance. While acknowledging potential headwinds such as elevated valuations, the firm expects any near-term pullbacks to be brief and shallow as the bull market regains momentum.

Analysis

The Stock Traders Almanac has issued a strongly bullish forecast, projecting a significant fourth-quarter rally and a potential rise in the S&P 500 to 7100 by the end of 2025. This outlook is predicated on key technical and seasonal indicators, specifically the market's defiance of bearish seasonality this year, exemplified by a five-month rally after the April low, which countered the typical 'Sell in May' pattern. The firm interprets this as a sign of powerful underlying market forces. Further bolstering this view is the S&P 500's performance in September, a historically weak month, where the index recorded eight new all-time highs. According to the Almanac's historical analysis, such an event has been followed by a positive fourth-quarter performance in seven of the last eight occurrences. While the report acknowledges potential headwinds, including elevated valuations, disappointments within the AI sector, and a looming government shutdown, it posits that any resultant market pullback would be 'relatively brief and shallow' and not derail the primary bull trend.

Key Decisions for Investors

• Given the Almanac's bullish forecast based on strong seasonal and technical signals, investors might consider maintaining or increasing long exposure to broad market indices like the S&P 500 (SPY) to capitalize on the predicted Q4 rally.
• The expectation that pullbacks will be 'brief and shallow' suggests that a 'buy the dip' strategy could be an effective approach for investors who are aligned with this thesis.
• It is crucial to monitor the specific headwinds mentioned—namely, high valuations, sentiment shifts in high-momentum AI stocks like SMCI and APP, and fiscal policy developments like a potential government shutdown—as these are the primary identified risks to the forecast.