Why History Favors Q4 and how it affects your trading
2024 has been a record-breaker for the S&P 500, with the index posting its best performance of the millennium through the first three quarters, advancing more than 20%.
But here’s the kicker: historically, the fourth quarter is the quarter to watch.
Why? Several factors make Q4 stand out:
- Year-End Pressure from institutional investors looking to boost annual returns, which can create upward pressure on the index as funds shift capital to stocks.
- Holiday Shopping Season, from Black Friday to Christmas, is synonymous with increased consumer spending. Retail, tech, and consumer discretionary sectors usually benefit, and since the S&P 500 has heavy exposure to these sectors, the impact can be significant.
- Lower Volatility toward the year’s end, which is associated with steadier gains and reduced risk aversion.
All of this explains why investors tend to grow more optimistic at the end of a year, often culminating in a Santa Claus rally.
In fact, Q4 has been up nearly 80% of the time since 1950, with an average gain of over 4%, twice as much as the next best quarter. 2024 adds to this already strong historical pattern with its outstanding year-to-date performance.
So, get ready for some serious action — because if Q4 is really where the magic happens, we’d hate for you to miss out!
