Historical Trends of Seasonality in the Market During the Calendar Year

Hi, my name is Dan Seder, Managing Partner at Blue Chip Partners. At a surface level, things can seem chaotic for investors at any given point in time. But when we zoom out and look at the big picture, trends would suggest that there are a number of compelling reasons investors should be bullish in the fourth quarter.

As I mentioned, things can seem chaotic for investors at any given point in time. But when we zoom out, we can look at some historical trends of seasonality and patterns that have occurred at various intervals throughout the course of the calendar year. And so, what you see on the screen here is a seasonality chart of the S&P of performance over various calendar months or quarters.

And so, here's how the chart works. If you look at the first three months of the year, we can see that the S&P 500, from a seasonal perspective, has been relatively flat, with some movements up and down. But on average, over the last 20 years, the S&P 500 has finished the first quarter, call it, on average, up about 1%. Using that same logic and following this chart through the second quarter of the year, you can see that we go from being positive one to being positive, call it three. So we've gained 2% in the second calendar year quarter. On average, we gain another 2% in the third quarter, going from roughly 3% to a positive 5%.

So at the end of the first nine months of the year, after the first three calendar quarters, on average, over the last 20 years, the S&P 500 has been up roughly 5%. But then something happens in the fourth quarter. You see this massive rally. The market goes from being positive five to being positive nine by the end of the calendar year. Four percentage points tend to come at the tail end of the year in the fourth quarter. So, from a seasonal perspective, I think that's pretty powerful.

And again, at any given point in time, there can be chaos in the headlines. It could be inflation readings or what the Fed is saying. It could be geopolitical tensions overseas, economic data, or corporate earnings, whatever the case may be. But there's a lot that can spook investors day to day. I'm not suggesting that this is the only data you look at; I think it's one tool in the toolbox. But when you look at the patterns that have occurred over the last 20 years, seasonality would argue that the fourth quarter is a great time for investors to be bullish.