Dividend Stocks with Strong Q4 Seasonality
It’s the best time of year, at least for seasonality. As shown in the snapshot of our Seasonality Tool below, entering October is the strongest period of the year for three-month returns, and shorter term returns are also some of the best.
Looking at dividend stocks specifically, below is a list of the 30 in the S&P 500 that have been the best Q4 performers over the last ten years. The 30 dividend stocks below have all averaged a Q4 gain of more than 11.5% over the last ten years. At the top of the list is Tapestry (TPR) with an average Q4 gain of 17.4% and positive returns 80% of the time. TPR is already having a banner year with a 30% total return, but if history is any guide, it could tack on even more through year end.
Schwab (SCHW) and Citizens Financial (CFG) rank as the second and third best dividend stocks in Q4 with average gains of more than 15% and positive returns 90% of the time. French-fry maker Lamb Weston (LW) ranks fourth followed by KeyCorp (KEY), which is the highest yielding stock on the list. Notably, Bank of America (BAC), JP Morgan (JPM), and BlackRock (BLK) rank 6th-8th, which means there are six Financials stocks in the top ten.
As you can see in the table, all but three of the dividend stocks shown are up year-to-date, with most of these names up double-digit percentage points entering Q4. It has been a strong year already for high-yielding stocks, and now they have Q4 seasonality as another tailwind.
As always, past performance is no guarantee of future results.
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Bespoke Market Calendar — October 2024
Please click the image below to view our October 2024 market calendar. This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Click here to view Bespoke’s premium membership options.
Bespoke Stock Scores — 10/1/24
Chart of the Day – Unexpected New Highs
Bespoke’s Morning Lineup – 10/1/24 – Market Hustle
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Doctors tell me I have the body of a thirty-year-old. I know I have the brain of a fifteen-year-old. If you’ve got both, you can play baseball.” – Pete Rose
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
With Chinese markets closed through October 7th, they didn’t rally last night, but Japan managed to erase some of Monday’s losses with a rally of nearly 2%. However, the country’s manufacturing sector remained in contraction as September PMI fell to 49.7 from 49.8 but still slightly beat expectations.
In Europe this morning, equities are also higher with the STOXX 600 up 0.4%. Like Japan, the manufacturing PMI for September further contracted falling to 45.0 from 45.8, but that was also slightly better than expected. The bigger news, though, was a tame inflation report where headline CPI rose just 1.8% y/y and pushed interest rates in the region sharply lower.
On the economic calendar in the US this morning, we’ll get manufacturing PMIs from S&P and ISM at 9:45 and 10, respectively. Also at 10, we’ll get Construction Spending and JOLTS. Following in the wake of Europe, US interest rates are also falling with the 10-year yield down over 5 bps to 3.74%. Lastly, the East Coast port strike is less than nine hours old, so it isn’t a major concern at this point, but the longer it lasts, the more we’ll have to start factoring in negative impacts on the economy.
A breeze of relief blew through Wall Street after the closing bell as the S&P 500 finished the month with a gain of just over 2%. Based on the calendar, October has been a much friendlier month to bulls from start to finish, but in between it hasn’t been a walk in the park. As shown in the chart below, the S&P 500’s average Intra month peak to trough decline (on a closing basis) has been the largest of any month at 4.6%.
The chart below shows October peak-to-trough declines for every October since 1945. For the last two years, the S&P 500 has experienced an intra-month decline of at least 5%, and there have been four in the last six years. While the average decline has been 4.6%, that magnitude has been heavily skewed by 25%+ declines in 1987 and 2008. On a median basis, October’s intra-month decline has been a relatively more modest 3.4%. Overall, though, there have still been 26 intra-month drawdowns of at least 5% in the last 79 years.
With those 26 intra-month declines of over 5%, October is tied with September for the highest frequency at 33%. From here, though, intra-month volatility tends to abate into year-end. Historically, only 24% of Novembers have experienced 5% intra-month drawdowns while December has had the lowest frequency of drawdowns of that size.
Copper Joins the Volatility Club
While the equity markets keep chugging along, there have been some spectacular/peculiar moves over the last several weeks. It started with the Nikkei in early August when it plunged over 10% in a single day. Over the last several days, we’ve seen extraordinary moves in the opposite direction in China. Just yesterday, even as China had its best day in over 15 years, the Nikkei fell more than 4%. As we noted on X, in less than two months now, the Nikkei has seen its two largest days of underperformance relative to the Shanghai CSI 300 dating back to when China joined the WTO in late 2001.
The crazy moves haven’t been just confined to equities either. On the heels of the big run in Chinese equities on Monday, copper got caught in the current with prices surging over 4% in early trading. Throughout most of the trading day, though, prices steadily gave up the gains finishing down over 1%.
Even for a commodity like copper that type of intraday reversal is uncommon. Since 1990, it’s only occurred six other times. It happened four times during the Financial Crisis in Q4 of 2008, and the only two other times were in June 2006 and November 2016 just after former President Trump won the 2016 election. As for how copper performed following the prior reversals, performance was mixed. In the four occurrences during the Financial Crisis, copper was up over 30% six months later each time, but in the six months after the two non-financial crisis periods, it was lower both times. Forward returns were trendless, but that doesn’t make the volatility any easier to stomach.
The Closer – Powell Disappoints, STLA Swoon, CoT – 9/30/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we kick off with an overview of recent Fedspeak including Powell’s comments this afternoon (page 1). We then dive into the news and poor performance from Stellantis (STLA) (page 2) before reviewing the latest positioning data (pages 3 – 6).
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Daily Sector Snapshot — 9/30/24
Chart of the Day: Hello October
China Outperforms the Rest of the World
Far and away the most notable market event over the past week has been the historic surge in Chinese equities. As we discussed in today’s Morning Lineup, the Shanghai CSI 300 has gone from a 52-week low to a 52-week high in only a couple of weeks thanks in part to a record over 25% rally in the past five days alone. Significant stimulative monetary policy, which we dedicated multiple pages in Friday’s Bespoke Report to discuss, has sparked the advance
The superlatives, however, don’t stop there. In the matrix below, we show the performance of the ETFs for 22 major global economies featured in our Global Macro Dashboard (which was most recently updated last Wednesday). As shown, Chinese equities, as proxied by the MSCI China ETF (MCHI), are now up close to 26% since September 13th (the date of the CSI 300’s 52-week low). In that same span, Hong Kong (EWH) has risen in sympathy with a 17.5% gain, but the third best-performing country – South Africa (EZA) – hasn’t even seen half of those gains. Other than China and Hong Kong, Australia (EWA) is the only other international market starting the week at a 52-week high. While the run in Chinese stocks is a high bar to be compared to, the rest of the world has at least generally seen positive performance. Only two countries are lower since mid-September: Brazil (EWZ) and Mexico (EWW). As such, most countries are also currently overbought with China and Hong Kong doing so to a record, off-the-chart degree.
The charts below show MCHI and the degree to which it is overbought by two measures. The first (middle chart) is the 14-day RSI, and the second (third chart below) is the number of standard deviations from its 50-DMA. As shown, after the rally of the last couple of weeks, the ETF has erased all of the losses since February 2023. For RSI, typically any reading above 70 could be considered “overbought”, but today that index is over 10 points higher. The only time the RSI was more extended was in the spring of 2015. Meanwhile, there has never been a point since the ETF’s inception (2011) in which it has been more extended above its 50-DMA. Last Tuesday MCHI traded over 5 standard deviations above its 50-DMA.
