The Best Quarter Since 1998

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.

View enlarged chart.

2020 is halfway over, which means the third quarter is upon us. Historically, the third quarter has been the weakest quarter of the year.

View enlarged chart.

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.

View enlarged chart.

For more on why what we’ve seen recently is extremely rare, yet could lead to continued gains, read this recent blog post.

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