📈  Chart of the Week 10/26/2025

By Michael Allison, CFA

Seasonality…. Am I right?

The Chart of the Week shows that 3rd quarter performance for the S&P 500 is historically by far the weakest quarter of the year. Q4 performance by contrast is historically the strongest period, and by a significant margin.

After a solid year-to-date showing in the first half of the year, with the S&P 500 up 6.2%, most experienced investors and prognosticators had what many could reasonably consider quite modest expectations for Q3, including me. After all, that would be consistent with the historical pattern—poor performance with lots or volatility.

Well…

As well known investment newsletter publisher, Jared Dillian once wrote, “The market always does what makes you feel the most stupid.”

Aaaaand that’s exactly what the equity market did in Q3—at least to me. The S&P 500 ended the period up 8.12%, well above the first half performance, and it did so with very low volatility. The VIX, which measures market volatility, with the exception of one day, was below its long term average level of 20 every day in the quarter. Through the end of Q3, the S&P 500 stood at +14.8% year-to-date.

How might we expect the equity market to perform in Q4?

After the very strong performance by the S&P 500 in 2023 and 2024, up 26.3% and 25.0%, respectively, and with the strong year-to-date performance thus far in 2025, one might be forgiven for being a bit cautious as we approach year-end.

However, if the historical pattern holds in Q4, then the market would be on a pace to have yet another +20% year.

My forecast?

My highest conviction forecast is that the market will find a way, yet again, to make me feel stupid.

Source: YCharts.

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