A Goldilocks First Quarter Has Bulls Smiling

Market Blog Posted by lplresearch

Friday, April 9, 2021

Stocks have kicked off the year in a strong fashion, and history shows this may give reason to be optimistic for the rest of the year. After a solid—but certainly turbulent—year in 2020, the S&P 500 Index has continued to set new all-time highs in 2021, returning 5.8% in the first quarter.

“Momentum breeds momentum, but you may not want too much of it,” said LPL Financial Chief Market Strategist Ryan Detrick. “Hitting singles and doubles has historically been the sweet spot for first quarter returns.”

As shown in the LPL Chart of the Day, returns between 5-10% have been the “Goldilocks” level in the first quarter, with an average return of 12.4% through the rest of the year.

View enlarged chart.

Returns through the rest of the year have historically been the worst when the S&P 500 is negative in the first quarter, averaging just 3.1%. However, too much momentum in the first quarter may not be ideal, either. When the S&P 500 has returned more than 10% in the first quarter, returns through the rest of the year have averaged 6.5%.

1987 is a year that is often referred to as the year of the “blow-off top,” as the S&P 500 returned over 40% through its peak in August, with over a 20% return in the first quarter alone. This was the only year with a first quarter return greater than 10% that was negative through the rest of the year, but removing 1987 from the data only raises the average to 8.7%, not enough to beat the 5-10% return group.


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and Bloomberg.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

  • Not Insured by FDIC/NCUA or Any Other Government Agency
  • Not Bank/Credit Union Guaranteed
  • Not Bank/Credit Union Deposits or Obligations
  • May Lose Value
View All Posts