Past Is Prologue

William Shakespeare famously quipped “What Is Past Is Prologue.” Success in most endeavors, including investment markets, requires an understanding of historical antecedents and learning from their implications for the future. Perhaps you know the phrase “Those who fail to learn from history are destined to repeat it.” We prefer to apply what has come before to improve the probability of success and reduce the chances of failure. “This time is different” remain the four most dangerous words in investing. History, through statistical data, may improve opportunity as well as help to avoid disaster.

The U.S. stock market has delivered impressive performance during the first nine months of 2024, marking the ninth-best three-quarter start in recorded history. However, historical data suggests that Octobers following strong three-quarter performances tend to exhibit heightened volatility. Today we analyze those historical trends, provides insights into the expected trajectory for the remainder of 2024, and evaluates the fourth quarter’s potential based on momentum and seasonality.

Upon reviewing historical years with exceptionally strong performance in the first three quarters, we found that Octobers in these years tend to experience choppiness and increased volatility. This aligns with broader seasonal trends, as October often serves as a transitional month for equity markets. Despite this turbulence, the long-term takeaway remains encouraging:

• Stock markets typically regain momentum following these choppy Octobers, leading to robust performance in the final quarter of the year.

A notable outlier in this dataset is the October 1987 correction, which skews the average fourth-quarter performance lower; however, using the median rather than the average provides a more accurate picture of how markets perform in the aftermath of choppy Octobers. The median data indicates that strong years often maintain upward momentum through the final months, underscoring the likelihood of a positive outcome for the fourth quarter of 2024.

Furthermore, the historical record reinforces the importance of seasonality in driving equity returns. November and December have consistently ranked among the top-performing months for equities. This trend suggests that, despite any volatility in October, investors could expect improved conditions in the year’s final two months.

Seasonal data implies that even when markets experience turbulence in October, they tend to stabilize and rally through November and December. This pattern is critical for investors seeking to align their strategies with market cycles and capitalize on seasonal tailwinds. Considering both the momentum from the first nine months of 2024 and the favorable seasonal trends, the data supports a bullish outlook through the

end of the year. While market volatility in October remains a possibility, historical evidence suggests that these disruptions are often short-lived. As markets shift into the more favorable November-December window, the likelihood of a strong finish to 2024 increases.

Investors should remain focused on the broader trend and avoid overreacting to short-term fluctuations. The fourth quarter presents a valuable opportunity to benefit from seasonal strength, particularly given the market’s strong performance to date.

Our Conclusion

Although October may bring some turbulence, the weight of historical evidence points to a likely recovery and strong performance in the final quarter of 2024. With November and December traditionally delivering robust returns, investors would be well-advised to stay the course. Maintaining a bullish perspective, despite any choppiness, aligns with both momentum trends and seasonal data.

At LRG Wealth Advisors, we remain optimistic about the market’s trajectory through year-end. We encourage investors to take advantage of these opportunities, understanding that volatility is a natural part of the market cycle.

We invite your thoughts and questions. Take good care.

LRG Wealth Advisors is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. LRG Wealth Advisors and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. LRG Wealth Advisors and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. LRG Wealth Advisors and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. LRG Wealth Advisors and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.