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What to Expect in the Fourth Quarter of an Election Year


We know it will be volatile, but will it move up or down? Here's the analysis.

Foreword: What a difference a year makes. Last year, heading into the fourth quarter, the Dow Jones Industrial Average (INDEXDJX:.DJI) was down five months in a row, losing about 13% in that span. This year, it's up four straight months heading into the final quarter, and up about 8.5% during that time. In 2011, however, the market strongly reversed and rallied 9.5% in October. Let's hope this month doesn't reverse this current uptrend. This week, we're going to take a look at how the market typically performs in the fourth quarter, and dig a little deeper by specifically looking at election years.

Fourth Quarter Is Strong: Below is a table summarizing Dow returns by quarter since 1950, and the fourth quarter clearly outperforms the others. The second table below shows more recent data (the last 20 years). In the past two decades, the final quarter does even better, averaging a 5.52% return in the last three months of the year and is positive nearly 80% of the time.

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