Key Takeaways
- The fourth quarter has historically been the best for U.S. stocks, with a strong first nine months of the year usually pointing to more gains in the last three.
- Bank of America analysts recently told clients they see bullish seasonal trends across most sectors except for energy and real estate.
It’s been a good year for U.S. stocks so far. Some experts are calling for an even stronger finish.
An uncharacteristically strong September—the month with a reputation as the worst for stocks—saw the S&P 500 add 3.5% after logging a series of fresh highs, bringing the benchmark index up close to 14% year-to-date. That, some say, could be a bullish signal about the next three months.
The end to a trading year is generally seen as an upbeat time for traders, who sometimes cite adages—and the history that underpins them—as reason for optimism. (The most important motto, however, might be the reminder that “past performance does not guarantee future results.”)
Over the last 76 years, when the S&P 500 climbed in the first nine months of the year, investors saw gains in the fourth quarter almost 90% of the time. And when the benchmark index hit records in September, according to LPL Financial, that number got even higher, creeping over 90%.
What This Means for You
For decades, seasonal trends have favored the fourth quarter. That history—but also, some strategists say, the backdrop facing stocks at the current moment—might indicate that the last three months of 2025 could deliver for investors too.
The index has logged an average return of 2.9% in the last three months of the year going back to 1928, Bank of America analysts recently wrote, better than any other quarter. Q4, the analysts wrote, is historically the “most wonderful time of the year for stocks.”
That period tends to kick off with a comparatively slow October—the month has posted negative returns about 40% of the time since 1928, according to BofA—followed by a stronger November.
That leaves the lion’s share of gains “dependent on December outperformance and some sector rotation,” said the BofA analysts, who said they see a “strong bullish seasonal bias” across sectors this year—except energy and real estate.
While not the best month of the year for stocks—July claims that title—December has still ranked among the strongest since 1928, according to Yardeni Research. That would be in part due to an observed boost near the end of the month, quarter, and year known as the “Santa Claus rally.”
Theories for why markets tend to rise at the end of the year include a combination of investor optimism around the winter holidays, the use of holiday bonuses to invest, lower trading volumes, and end-of-year tax considerations.
“We would buy dips in equities into year-end,” Goldman Sachs analysts advised clients Monday, anticipating another end-of-year rally despite some near-term volatility, with a “Goldilocks backdrop”—in which the economy is neither running too hot (with “anchored” inflation), nor too cold (in terms of economic growth)—supported by macroeconomic trends.
Adam Turnquist, LPL’s chief strategist, likes the setup for stocks heading into Q4. “Earnings momentum, a good enough economy, the resumption of the rate-cutting cycle, and continued signs of runway for the AI secular growth theme have been the primary catalysts supporting stocks” through September’s seasonal headwinds, he said.