To The Moon

We are coming to an end of Q3 2023, there have been general belief that 4th quarter will generally see better returns.

But is it true? In this article I will be using past quarterly S&P 500 prices and its % change to see if Q4 over the past 10 years did give us any surprise.

Based on what I have computed from S&P 500 historical quarterly average over the last 10 years from 2012.

We can see that those bar in RED are having sharp decline from previous quarter, there is only one occurrence of Q3 to Q4 which happened in 2018.

The other years, we can see that there is a significant improvement from Q3 to Q4. But is this true for 2023?

What Factors Might Change Q3 to Q4 Stellar Performance Increase?

As we already know there have been some events and news which I have shared in an earlier article, which I shall not repeat.

"Golden October" In Sight For S&P 500?

Here are some factors which I think might cause Q4 2023 to be volatile :

U.S. Economy Output Gap

With all resources running near full potential, market already show signs that it has defy the expectations. This year we can see that the market’s returns are contributed largely by the mega-cap stocks in the “tech-heavy” sectors.

Stocks has turned out to be more upbeat in July as market start to predict a “soft-landing” U.S. economy and projections towards recessions is almost lowered down.

Output gap (which is the difference between the economy’s actual versus maximum potential output) of the U.S. economy has showed to be narrow.

Existing resources have been used to make flow of goods and services efficiently. This has restrict the ability to do more

Tight Labor Market

If we look at the unemployment rate in August which is 3.8%, this show that there is a risk to have additional works to increase the U.S. economy’s output beyond what it is currently doing.

This insufficiency might pose a risk to inflation. Even thought we see GDP figures going up, inflation data show it is coming down. U.S. economy has so far managed to avoid recession, but the dangers of reduction in consumer savings and Fed’s rate-hike campaign effects is not too effective.

This will in turn slow economic growth, which will boil down to companies posted lower earnings in the near term.

There are earnings results announced in Q4 which I think we need to look out for.

Generative AI Potential and Take-Off

There have been a lot of talks around generative artificial intelligence (genAI) , year-to-date stock market gains is expected to benefit from these.

I think we need to understand how generative AI can be integrated to business around the world to transform it to money-making prospects.

This is how internet was being looked at when it first came out. Generative AI is new and evolving so we cannot apply traditional way of looking at technology on it.

There might be some breakthrough or suddenly we could see genAI break out.

Summary

From what I have gathered and observed, we cannot be 100% sure that past performance improvement in Q3 to Q4 should be looked at for Q4 2023.

We are in a very different word now, with things changing very rapidly, and wealth could be created in a much shorter time.

It is the adaptability that will make us shine and succeed in trading and investing. I would mean that we need to learn and diversify when necessary.

Appreciate if you could share your thoughts in the comment section whether you think S&P 500 will have a stellar performance in Q4 2023?

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.