The stock market has been exceptionally strong this September. What's next for Q4 2018


From a seasonality perspective, the U.S. stock market is weakest in September.
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However, the U.S. stock market has been exceptionally strong this September despite starting with some short term weakness. In other words, it has completely ignored “sell in May and go away” from May – September this year.

When the market ignores bearish seasonality, forward returns are very bullish.
This is simple and logical. If the market goes up when it “should go down”, imagine how much higher the market will go up when it “should go up”.
This is what happens next to the S&P 500 when it makes a new all-time high in September. 1950-present

This is what happens next to the Dow when it makes a new all-time high in September. Data is more limited: 1970 – present.

Conclusion

This study suggests that the stock market will do well in the next 3 months. Might even go BOOM. If it does, that will be a terrific Christmas present.
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2 comments add yours

  1. Hi Troy, great stuff as usual. I noticed two additional bearish cases. In 1980 the S&P was negative 1 year later and in 2014 the Dow was negative 1 year later. I have also been noticing how flat the median returns are from 9 months to 1 year later. Thanks, Eric

    • You’re right. From my point of view I think this means that the stock market will top 3 quarters from now? We’ll see

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