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Stock market bulls may beat bears in Q4; Here’s why

Stock market bulls may beat bears in Q4; Here’s why

The last quarter of the year traditionally witnesses a seasonal stock market rally, buoyed by a confluence of factors, including year-end portfolio evaluations, holiday spending, and tax planning. 

However, this year’s outlook had been clouded by concerns over high yields, soaring interest rates, and looming recession fears. 

Yet, recent market performance paints a different picture. The US stocks are displaying unexpected resilience, challenging prevailing worries and hinting that the much-anticipated Q4 rally may still be on the horizon.

‘Stock market’s refusal to decline on bad news’

Indications that a Q4 seasonal rally is in the cards primarily include the stock market’s recent reaction to a batch of bad news, including the escalating conflict on Monday in the Middle East and the red-hot jobs data released last Friday.

After an initial sell-off, equities on the whole staged a sharp recovery on both days, closing the sessions in the green. 

According to investor and former money manager Puru Saxena, this positive reaction seen in stocks is an encouraging indicator for its Q4 performance.

“The stock market’s refusal to decline on bad news is a good sign for the seasonal Q4 rally.” 

– Saxena wrote in a tweet.

S&P 500 rose 3% since last week

After experiencing a significant decline to nearly 4,200 at the start of October, the S&P 500 – the stock market index that tracks the performance of the largest 500 US-listed companies – staged a strong recovery since Friday, October 6. 

Over that period, the index rose nearly 3%, from around 4,230 to 4,376 as of October 12. 

S&P 500’s performance over the past week. Source: TradingView

Other major US indices, the Dow Jones Industrial Composite (DJIA) and the Nasdaq Composite, also rallied higher since the end of last week – climbing 2.13% and 3.26% respectively. 

In conclusion, the stock market’s bullish performance signals sustained investor confidence, even in the face of seemingly adverse economic indicators, such as an unexpectedly robust September jobs report and heightened Middle East tensions exemplified by the recent Israel-Hamas clash.

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