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The dog days of summer are usually bad months for the stock market, and that is playing out this year. <\/p>\n
Early last month saw stocks tumble<\/a> as U.S. economic data raised fears of a recession, and the yen carry trade unwound. And as September began, the S&P 500 had its worst week in a year and a half<\/a>. <\/p>\n But on the flip side, that sets up the final months of the year as a time that has traditionally seen big rebounds.<\/p>\n According to Bespoke Investment Group, October has historically been the month where the biggest stock market surges have begun.<\/p>\n \u201cThis should make sense intuitively given that August and September have historically been weak months and the market has always\u00a0eventually<\/em>\u00a0bounced back from sell-offs,\u201d according to a note on Friday.<\/p>\n By its tally, there have been 61 rallies of 10% or more since World War II, and 19 of them started in October. That\u2019s a third of the total and well above any other month. March has 10 while all the other months are in the low- to mid-single digits.<\/p>\n Similarly, Ned Davis Research said the stock market is likely to stage a \u201cpersistent ascent\u201d that will be supported by seasonal trends in the fourth quarter. Namely, October through December is typically the year\u2019s strong three-month period.<\/p>\n December is also when the so-called Santa Claus rally takes place as seasonal cheer, optimism about the year ahead, a slow news cycle, and thin trading volumes often translate to rising stocks.<\/p>\n So far, several key market fundamentals have held up. While job growth has slowed<\/a>, economists point to low unemployment claims, robust corporate earnings, strong GDP readings and estimates, upbeat retail sales, and rising wages.<\/p>\n Jay Hatfield, CEO at Infrastructure Capital Advisors, said in a note Friday that the latest jobs report is still consistent with a growing economy and validates his S&P 500 target of 6,000, which implies 11% upside. <\/p>\n That assumes the November election will result in divided government with neither a Democratic nor Republican sweep. He also thinks that not only will the economy avoid a recession, it won\u2019t slow toward a soft landing.<\/p>\n \u201cWe continue to believe that there will be no landing in the US economy as\u00a0the bond market has already cut rates for the Fed\u00a0with the 10-year treasury declining by over 100 basis points,\u201d he predicted.\u00a0\u00a0<\/p>\n That contrasts with more bearish voices on Wall Street like Citi Research chief U.S. economist Andrew Hollenhorst, who warned that the recent payroll data are signaling a recession is on the way<\/a>.<\/p>\n In particular, he pointed to the three-month moving average of private-sector job gains dipping below 100,000.\u00a0<\/p>\n \u201cThe takeaway from the range of labor market data is clear \u2013 the job market is cooling in a classic pattern that precedes recession,\u201d he wrote.\u00a0<\/p>\n<\/div>\nRecommended reading:<\/strong>
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