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Bulls in charge again in Q4

As the final quarter of the year looms, we look at the historical performance for key stock markets in the period.

Bulls stockmarket
Source: Bloomberg

US markets are at all-time highs, European indices have broken out from their summer downtrend, and of 25 major country exchange traded funds (ETFs), only Russia is in negative territory for the year. Admittedly, the FTSE 100 is under pressure, thanks to a shifting Bank of England (BoE), but even here the index remains 10% higher than it was before the US election.

So, what now? The S&P 500 has been remarkably quiet and resilient, going without a 2% drop for over 200 trading days, the longest period since 1996. Many continue to say that the bull market is getting old (it isn’t, on some measures it is four-year-old and in other ways the overall equity space endured steep losses in 2015 that effectively ended the post-2009 rally), arguing that excessively high valuations and a process of gradual tightening from the world’s big central banks will derail the equity surge.

However, in August we had hurricanes, fear of nuclear war and a host of other issues, and equity markets came through without heavy losses. While September is historically a weak month for equity markets, we are days away from its end and there is little sign of a major sell-off approaching yet.

And then we get into the fourth quarter (Q4). Over the past fifteen years, the FTSE 100, DAX and S&P 500 have all enjoyed their strongest quarter of the year in Q4. These can be seen in the chart below.

Indices Q4 price chart

While this doesn’t rule out the possibility of a dip throughout the period, these should be seen as buying opportunities. This bull market has further to run, and Q4 2017 may be one of its great moments.

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