Will We See a 4th Quarter Rally? Ep #232

Will We See a 4th Quarter Rally?

The S&P 500 was down 4% in September, continuing the downward trend we also saw in August. And almost ALL of the asset classes have been down the last couple of months. To address this troubling trend, my business partner, Brian Cayon, CFA®, CPA, wrote an article about the 4th quarter. So in this episode of Best in Wealth, we will talk about his research and seek to answer the question: Will we see a 4th quarter rally?

Will we see a 4th quarter rally in 2023? I share some research in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement Click To Tweet

Outline of This Episode

  • [1:05] Thank you for being a listener!
  • [2:14] What is causing the stock market decline?
  • [6:21] What is the S&P 500 telling us?
  • [10:12] Research on the 4th quarter since 1952
  • [15:07] Will we have a 4th quarter rally?

What is causing the stock market decline?

The majority of the September decline in the S&P 500 came right after the Fed meeting when they announced that they would leave the interest rates unchanged after having raised them continuously.

You would think that would be pretty good news, right? But after the meeting, the Fed implied that rates are likely to stay higher for longer. After that, there were huge selloffs in the market.

If we look at the last couple of months, all of the headlines are threatening our 401Ks. There might be another government shutdown. There are also talks of a UAW strike. We are seeing rising oil prices.

It is natural for us to feel some angst. It can be tempting to make changes to your retirement accounts instead of staying the course (according to your investment policy statement).

But oftentimes when we try to make drastic changes, we sell the things that are rallying and buy the things that are about to pull back. It is difficult to stay calm.

What’s contributing to the stock market decline that we’ve seen in August and September? I share some thoughts in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning… Click To Tweet

What is the S&P 500 telling us?

The S&P 500 was among the worst-performing asset classes in 2022 at -18.5%. It had a horrible run for 2.5 years, ending 12/31/2022. The S&P 500 went up over 15% this year. When this happens, it is not uncommon for asset classes to take a breather. And we can definitely call this a breather.

But this does not happen very often. Brian looked at over 70 years in his research. We have only had a negative August and September 13 times since 1952. In 2022, August was -4.2%. September was -9.3%. Remember how we felt last year?

How did we do historically in October? 77% of the time—10 out of the 13 years—October has been positive. In 2022, we were up 8% in October. In 2011, we were up 10.8%. In 1974, we were up 15.3% in October.

There were three times when October was also negative (1952, 1957, and 1990). In two of those years, we were down less than 1%. In 1957 we were down 3.2%. This should give us all hope.

Research on the 4th quarter since 1952

If we average the whole 4th quarter, how many of them ended positively? 12 out of 13 times, the 4th quarter has ended positively. A few times it was over 10%! The S&P 500 averages 10% per year. But we had a year where we were down -43%. We had a year where the S&P 500 was up over 40%. The stock market rarely lands near that 10% average.

What if we make an emotional response to our money and do not stick around for the returns? What if we remove our money and then end the year positively? If you are a good family steward, you are investing in every asset class. 93% of the time we see a positive 4th quarter after a bad August and September. Let that give you the strength you need to continue on your investing path.

What else can give us hope? Listen to hear whether or not we think you’ll see a 4th quarter rally!

What does research on the 4th quarter of the stock market—since 1952—tell us about the 4th quarter in 2023? I share more in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning… Click To Tweet

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Podcast Disclaimer:

The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.

About the author, Scott Wellens

Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.

Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.

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