What a quarter the second quarter was, with the S&P 500 Index adding 20.0%, for the best quarter since 1998 and the best second quarter since 1938. Of course, stocks fell 20% in the first quarter, so what we really have is a bad case of whiplash in 2020 thus far.
“A 20% quarterly gain is quite rare, but the catch is previous large quarterly gains have actually led to continued strength,” according to LPL Financial Senior Market Strategist Ryan Detrick. “In fact, a quarter later stocks have been higher the past 8 times after gaining at least 15% during the previous quarter.”
As the LPL Chart of the Day shows, future strong returns are quite normal after a big quarter. Although it might not seem likely given the headlines and magnitude of the current bounce, it is important to be aware that extreme strength usually begets more strength.
2020 is halfway over, which means the third quarter is upon us. Historically, the third quarter has been the weakest quarter of the year.
Breaking it down more though shows that July has been actually the strongest month during the summer. August and September have tended to be troublesome and dragged the third quarter down.
For more on why what we’ve seen recently is extremely rare, yet could lead to continued gains, read this recent blog post.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value