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?

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Outline of This Episode

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.

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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!

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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 US Securities and Exchange Commission 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.