What Happens After A Big First Quarter For Equities?

Although the S&P 500 Index just missed out on a five-month winning streak in March with a 0.04% loss, the good news is it still gained 5.5% in the first quarter. This came out to the best quarter overall since the fourth quarter of 2015, and it was the best first quarter gain since 2013. Given that the S&P 500 went on to gain another 17.8% in the final three quarters of 2013, the big question is: What does a big first quarter mean?

Going back to 1950*, this was the 25th time the S&P 500 gained 5% or more during the first quarter. The good news for the bulls is the returns after a big first quarter have been broadly stronger across the board.

Here are some stats to consider after the S&P 500 gains 5% or more in the first quarter:

  • April has been up 2.0% on average versus the average April gain of 1.5%.
  • The second quarter has gained 3.2% on average versus a 1.7% average return.
  • The rest of the year, the S&P 500 has been up 9.6% on average versus the average return in the final three quarters of 6.4%.
  • Last, incredibly, the full year has been higher 23 out of 24 times, with only 2011 lower. On a total return basis (including dividends), all 24 years have been higher.

Per Ryan Detrick, Senior Market Strategist, “Although you’d think a big first quarter could lead to some near-term weakness, it sure doesn’t look like that. In fact, continued strength and a good deal of outperformance are perfectly normal after a big first quarter. Of course, all years are different and there are many other factors to consider; however, this does help to suggest that any pullbacks could be used as buying opportunities and that the bull market is still alive and well.”

 

IMPORTANT DISCLOSURES

* Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation may not develop as predicted.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

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