S&P 500 Enters Best Quarter with 34 Positive Outcomes Since 1985
The S&P 500 has gained in 34 of the last 41 fourth quarters, averaging a 4.4% rise despite recent Fed rate hikes.
Key points
- The S&P 500 rose in 34 of the last 41 fourth quarters, with an average gain of 4.4%.
- The Federal Reserve raised interest rates to 3.75%-4.0% on Wednesday, its first hike since 2023.
- The index is up 10% in 2026, matching the positive start seen in 26 of 31 similar years since 1950.
The S&P 500 enters the fourth quarter with a historical win rate of 34 out of 41 years since 1985. This statistic highlights a consistent pattern of strength in the final three months of the calendar year.
Investors face a fresh challenge as the Federal Reserve raised rates for the first time since 2023. The index closed Wednesday near 7,550, still up 10% for the year but 3% below its August peak.
Historical Fourth Quarter Performance
Data from 1950 shows the index finished higher in 61 of 76 years. The average gain for this period is approximately 4.2%, significantly outperforming other quarters.
The median gain since 1985 reaches about 6%, indicating that typical outcomes are stronger than the mean. This consistency makes the fourth quarter the strongest performance period for the benchmark.
Major Declines Share Common Causes
Seven negative outcomes occurred since 1985, with four being single-digit declines. The three significant drops happened in 1987, 2008, and 2018, each losing roughly 14% to 23%.
These losses resulted from external shocks like crashes or credit crises rather than seasonal factors. The 1987 decline occurred despite the index being up 30% for the year at the start of the quarter.
Current Monetary Policy Risks
The Fed now sets rates between 3.75% and 4%, with projections allowing for further increases. This mirrors the 2018 environment where tightening contributed to a 14% fourth quarter loss.
Yahoo Finance notes that the Nasdaq Composite fell 17% in the final quarter of 2018. Current conditions suggest similar pressure could emerge if the Fed continues to raise rates before year-end.
