S&P 500 could hit unprecedented 6,000 by year-end after unusual September gains

The S&P 500 racked up gains in September, bucking a trend that is typically the weakest month of the year, and now has history on its side to mount a further rally to unprecedented 6,000 by year end, according to a new analysis from Bank of America.

"When the SPX is up in September, the rest of the year has had stronger returns with the SPX up 67% of the time on an average return of 1.62% (1.54% median) in October and up 79% of the time with an average return of 5.08% (5.81% median) in 4Q," BofA analysts noted in a report released Monday. "This supports SPX 6000 into yearend," they added.

September is typically the weakest month of the year for the S&P 500, but the major index gained 2.02% in the month, adding to its year-to-date gain of 20.81%, setting "the stage for a potentially robust fourth quarter," the analysts said. 

History suggests that when the S&P 500 is up between 15% and 25% year-to-date through the third quarter, the index has an average fourth-quarter return of 4.40%, indicating that the index could potentially rack up gains to end the year between 5,930 and 6,185. 

As well as bucking the seasonal weakness, the strong gains seen in Q3 during a presidential election year bodes well the S&P 500, BofA adds, noting that when the index up is in an election year, a positive Q4 is seen 89% of the time, with an average return of 4.98%.

But for all the optimism on further gains, the analysts stressed the importance of the S&P 500 maintaining support levels in any downside event.

"Holding the 5670-5650 to 5615 area (SPX 5600s) would keep this breakout firmly in place," they said, adding that the road higher is likely to be paved with volatility and potential risks heading into the final quarter of the year. 

Source: Investing.com