With Monday’s decline in stocks, the equity market kicked off the last week of Q3 right according to the script. The table to the right and the charts below show the average historical performance of the S&P 500 during the last week of each quarter and the first week of the following quarter going back to 1928 and over just the last 25 years. The last week of the quarter has historically been weak for the first three-quarters of the year but especially weak for Q3. Since 1928, the S&P 500 has averaged a decline of 0.66% during the last week of Q3. In the last 25 years, the returns have not been quite as bad, but they are still negative (-0.13%). We would also note that the last week of Q3 has been negative in seven of the last eight years, so even during the current bull market returns have been weak during this period. The quarter that finishes off on the most positive note is Q4. Going back to 1928, the S&P 500 has averaged a gain of 0.86%, and over just the last 25 years it has averaged a gain of 0.30%.
If there is a silver lining to the typical weakness we see at the end of Q3, it is that the first week of Q4 typically sees a rebound. As shown on the right-hand side of the table and the second chart below, the S&P 500 has averaged a gain of 0.47% during the first week of Q4. Over the last 25 years, the return has been negative (-0.29%), but that decline is wildly skewed by the 14.59% drubbing we saw in the first week of Q4 2008. Since the bull market began in 2009, the S&P 500 has seen gains during the first week of Q4 five out of seven times for an average gain of 0.97%.