Everyone loves watching a race with a strong finish. The end of a marathon isn’t as fun to watch as the competitors limp across the finish line, but sprints keep us on the edge of our seats. It was awesome watching our local Olympian, Courtney Frerichs, win the silver medal at the Steeplechase this past summer. She had a strong finish and the market usually does too.
The last eighteen months have been a crazy ride with the market and economy. Some parts of it are strong, such as stock prices which are 27% above pre-pandemic highs according to Yahoo Finance. But others, such as Consumer Price Index (inflation) and oil prices are at multi-year highs.
As I had predicted in earlier articles, stocks slumped in September, but the S&P 500 usually finishes the year strong going into Christmas making the fourth quarter a good one. In the last 26 years, the S&P 500 averaged its best growth in the fourth quarter.
It’s not just the S&P 500 that performs its best in the final quarter, but so does the MidCap 400, SmallCap 600, and the Nasdaq-100. All of them have higher average returns in the fourth quarter than the other three quarters in the year.
Of course, historical trends aren’t guarantees but they can be good guides. I think the trend will continue again this year.
There is real concern about inflation, economic slowdown, and the debt ceiling deadline but there is also the positive news that the Fed has signaled a plan to start pulling back their bond purchases (tapering) that the market seems comfortable with.
My wife taught at the elementary school that Courtney Frerichs went to as a child. Courtney was so much faster than the other kids on the playground. The teachers would say to one another, “that kid just has another gear.” Let’s hope the market does too.
Have a blessed week!
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