Exchange traded funds indexed to the S&P 500 lost more than 10% in the third quarter as stocks were dogged by Europe’s debt fracas and weak economic data.
The iShares S&P 500 (NYSEArca: IVV) fell over 5% in September.
However, bulls can take solace in the fact that stocks historically tend to rebound in the fourth quarter after a rough third quarter.
“October may be the month that most investors fear, as five of the last 10 bear markets ended in October with notable sell-offs,” said Sam Stovall, Chief Equity Strategist at Standard & Poor’s, in a note. “In addition, good things usually happen in the fourth quarter of the year.”
Historic data reveals that since 1945, whenever the S&P loses 10% or more in the third quarter, the index returned an average 7.2% in the fourth, gaining eight of nine times. Furthermore, the S&P 500 generally performed well in the fourth quarter of every year, rising an average 3.7% and posting gains 77% of the time since 1945, according to Stovall. However, the S&P 500 tacked on a lower average of 2.4% during every third year of a president’s four year term.