UPDATE: Will the stock market live up to the 4th quarter's reputation for strength?
By Anneken Tappe
Markets await Friday's employment data
Equities have a reputation to uphold as the fourth quarter--historically the market's strongest--kicks off Monday in the wake of an unseasonably strong September. The coming week, meanwhile, offers plenty of high-profile data that could set the early tone.
"History has shown that the fourth quarter has frequently been kind to equities," said Ryan Detrick, senior market strategist at LPL Financial Research, with the holiday months of November and December usually turning in strong performances (see chart below).
Since 1950, the S&P 500 has gained 3.9% on average in the fourth quarter, advancing 79.1% of the time, the data show.
Then again, September has produced, on average, the worst monthly performance of the year. Stocks easily ignored that seasonal headwind this year, rallying to records. That is actually even more encouraging for bulls, Detrick said, noting that when the S&P 500 is up more than 10% year-to-date heading into the fourth quarter and makes a new high in September, the returns have been even better than the average, up 5.9% and boating positive returns in 11 out of 12 years.
LPL isn't looking for a 6% jump in the fourth quarter, but the data suggest the chances of a major selloff are "rather slim," he said.
Meanwhile, investors will be looking to the coming week's data flow, including the September jobs report due on Friday, for clues while also bracing for the start of earnings season.