Despite Tariff Woes, Stock Market to Gain in Q4

The third quarter is ending on a strong note for stocks, but there are reasons to be wary of the most overexuberant areas of the market.

The fourth quarter could bring gains investors won’t want to miss — though it may be wise to avoid the riskiest corners of the market.

The statistics are upbeat: the S&P 500 is set to close the quarter on a five-month winning streak.

The benchmark index is up more than 13% and on pace for its best September gain since 2013 — and that’s before what is historically the strongest quarter of the year, Adam Clark reported for Barron’s Daily.

Still, there are a few worrying signs of mania. Meme stocks such as Opendoor Technologies continue to attract intense trading, while “crypto-treasury” stock plays are generating sharp gains by announcing plans to accumulate obscure digital tokens.

That’s a symptom of individual investors increasingly driving the market — retail trades now account for 18% of stock market volume, up from 10% in 2010, according to the latest estimates by SIFMA, a Wall Street trade group.

Investors’ optimism largely hinges on expectations that the Federal Reserve will cut interest rates.

But Fed officials have been warning against such forecasts while inflation remains high.

The government shutdown also threatens to delay the September jobs report, complicating decisions for monetary policymakers already split over the timing of rate cuts.

So, is it just “dumb money” chasing speculative highs? Not entirely. Strategists at Goldman Sachs recently upgraded their stance on global equities to “overweight” from “neutral” over a three-month horizon.

Even if the economy slows, a low risk of recession combined with supportive monetary and fiscal policies has historically led to stock market gains, they noted. The data and history align: the fourth quarter could bring gains investors won’t want to miss — though it may be wise to avoid the riskiest corners of the market.