History Lessons in the Fourth Quarter

Many investors were ready to say goodbye to the 2011’s third quarter with extreme volatility demanding attention and negative returns for many types of investments.  Indeed, when you review the chart below, the fate of most investors was grim from June 30th to September 30, 2011.

 *Source: JPMorgan Asset Managment

News from the Europe has been dismal.  Questions linger about the growth prospects for US and global markets.  Whether we’re experiencing a new or double-dip recession or just very slow growth, the economic picture does not feel rosy.  

While emphasizing that past performance does not predict future returns, the fourth quarter has historically been the best return environment for stocks.  While the third quarter has been the worst performing quarter for the S&P 500 on average (going back to 1928), the fourth quarter has been the best.  Interestingly, this trend has been even more distinct over the last 20 years. 

 *Source: Bespoke Investment Group


Many people will be watching third quarter earnings as they are announced as an important gauge of trends in our economy.  Greece and the Eurozone’s issues are far from resolved.  Don’t get too distracted by these headlines to lose the lessons of the history of returns.


[1] All indexes are unmanaged.  MSCI EME represents emerging market equities.  Russell 2000 is an index of 2,000 smaller U.S. companies.  MSCI EAFE is an index of large companies in developed countries outside the US.  REITS is composed of the NAREIT Equity REIT index composed of US Real Estate Investment Trust equities.  The S&P 500 is an index of 500 widely held stocks that’s generally considered representative of the U.S. stock market.  DJ UBS Cmdty is compiled by Dow Jones and represents the price of a basket of commodities.  Market Neutral is CS/Tremont Equity Market Neutral index with long and short exposure to stocks.  Barclay’s Agg is an index of US bonds representing a variety of investment grade bond assets and weighted by outstanding composition.  Inclusion of these indexes is for illustrative purposes only.  Individuals cannot invest directly in any index, and individual results will vary.


The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any opinions are those of Melissa Joy and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of October 14, 2011 and are subject to change without notice.