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September did not bring its usual gloom to the stock market.
The S&P 500 finished positive in what’s typically the weakest month of the year for investors, bucking decades of history to the benefit of the bulls. The index advanced more than 3.5 percent in September on account of earnings momentum, the start of a Fed rate-cutting cycle, and continued enthusiasm around artificial intelligence.
That resilience now carries stocks into the final and best quarter of the year. Since 1950, the S&P 500 has averaged a 4.2 percent gain from October to December, with positive returns 80 percent of the time. When the quarter ends higher, the average gain increases to 7 percent.
“Seasonal headwinds didn’t materialize this month, and investors may now turn their attention to the historically strong fourth quarter,” said Adam Turnquist, chief technical strategist for LPL Financial.
Seasonality looks even more favorable when you account for market peaks.
Since 1980, the S&P 500 has topped out in the fourth quarter 71 percent of the time, and in December half the time, according to DataTrek Research.
That suggests September’s rally was a prelude to more of the same.
Meanwhile, the fundamental backdrop remains just as robust. Wall Street analysts have been raising — rather than cutting — earnings estimates for 2025 and 2026, which is unusual for this time of year.
While it’s true that Big Tech has made the market extremely top-heavy, earnings growth for the sector is nonetheless expected to outpace the broader index by a wide margin.
The Fed offers another tailwind through the end of the year. Markets see overwhelming odds for rate cuts in October and December, and with job growth slowing and core CPI holding steady, policymakers have cover to ease without stoking inflation fears.
If Friday’s jobs report publishes within range of expectations and earnings continue to deliver, history and fundamentals will remain aligned for a strong finish.
Phil Rosen
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