While many investors are hoping for a year-end rally, several analysts are warning that a fourth-quarter pullback remains a real possibility.
Valuation concerns: Large-cap stocks are trading at historically high valuations, reminiscent of the 2021 peak. That leaves little room for error if economic data disappoints.
Tariff aftershocks: April’s ‘Liberation Day’ tariffs triggered a sharp sell-off, and although markets rebounded, strategists at Stifel expect an ‘echo’ effect—potentially a 14% drop in the S&P 500 before year-end.
Economic slowdown: Consumer spending is showing signs of strain, and real wage growth may not keep pace with rising prices. That could dampen demand and corporate earnings.
Trade uncertainty: The 90-day tariff pause expired in July 2025 (with adjustments), leaving markets to navigate the fallout—valuation echoes, trade uncertainty, and investor psychology now collide in Q4’s shadow. This could lead to headline-driven volatility through Q4.
Mixed sentiment: Some strategists remain cautiously optimistic, citing resilient labour data and hopes for more Fed rate cuts. But others warn that investors may be wishful thinking!
The fourth quarter (Q4) of the calendar year runs from 1st October to 31st December. In financial and editorial contexts, it often carries symbolic weight—year-end reckonings, holiday spending, and final earnings reports all converge here.
A pullback is due, but when?