Investors who are enjoying the stock market’s current six-month long rally may be set for even more good news.
After a rough patch during the first three months of the year, the S&P 500 has posted six-straight months of gains — rising roughly 11% since April 1. Even better: It’s only the sixth time since 1928 that the index has posted gains in each separate month from April through September, according to stock market research firm Bespoke Investment Group.
And each time it’s happened before, the market has gone on to rise still further in the final three months of the year – returning a whopping 9.2% on average, compared to 1.9% in all years.
“Strength begets strength in the market,” says Bespoke Investment Group co-founder Paul Hickey. In fact, whenever a six-month streak occurs, the following three months will see positive returns 85% of the time.
To be sure, it’s not all clear skies. The stock market has been trading near record highs, with many investors arguing it’s overvalued.
Meanwhile there are two things to be on the lookout for that could trip up the market, according to Hickey. Political uncertainty, especially surrounding mid-term elections, could make make stocks unpredictable. And fourth quarter earning reports have been less than stellar so far.
Bespoke’s own forecast is for a fourth-quarter stock market gain of “low to mid single digits.”
Here are the years in which there have previously been winning streaks in the months of April through September:
Fourth quarter return: 15.9%
Fourth quarter return: 10.3%
Fourth quarter return: 8.2%
Fourth quarter return: 5.5%
Fourth quarter return: 6.1%