Stock market typically cools off in October following a really strong third quarter
The stock market typically cools off in October following a really strong third quarter, but any weakness could prove to be a potential buying opportunity for year-end, according to Piper Sandler. Stocks are off to a rocky start this month, after an escalation of conflict in the Middle East, a port strike in the U.S., and the fallout from Hurricane Helene spooked investors. On Tuesday, the first day of the month , the Dow Jones Industrial Average and the S & P 500 fell, while the Nasdaq Composite dropped more than 1%. As of midday trading Wednesday, all three major averages were negative on the month. Those losses come after the S & P 500 advanced 5.5% in the three months ended September. Still, Craig W. Johnson, chief market technician at Piper Sandler, said that choppy performance is consistent with history, and could be the set-up for a rally in November and December. Since 1928, following the 34 instances when third-quarter returns were greater than 5%, the S & P 500 then slid 1% on average in October, the technician said. However, the two months following were positive, with the fourth quarter overall gaining 2.7% on average, and 5.2% on a median basis. “We believe October will be more of a ‘treat’ than a ‘trick’ for investors as equity markets approach short-term overbought conditions again,” Johnson said. “Monitor pullbacks within the context of the long-term uptrend for potential buying opportunities.” .SPX 1M mountain S & P 500 Many investors agree that the bias into year-end is to the upside, after some near-term seasonal weakness. On Wednesday, Tom Lee, head of research at Fundstrat Global Advisors, was optimistic on the path forward for equities. “I think we’re still in the midst of a very tricky period, because we’ve got the election in less than 35 days, and now we’ve got two things that investors don’t know how to discount. One is the mounting tensions in the Middle East, and then a port strike that is potentially going to cripple the economy,” Lee said on CNBC’s “Squawk Box.” “And so, I think that as investors worry about this, if we get a dip, and a big dip, I think you still want to buy that dip,” Lee continued. “Because the setup into year-end has a lot of tailwinds.”
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