In A Way, This Was One Of The Worst Quarters In Stock Market History

relieved trader

From Dan Greenhaus at BTIG, some very interesting perspective on Q3’s awful market performance.

Today’s durable goods report is just the latest in a series of data points that suggests the economy was not so terrible in the third quarter. Indeed, with a little bit of good luck, the Q3 GDP print might come in at 2.5%, hardly a robust rate of growth but certainly not a recession. Shipments of nondefense capital goods excluding aircraft rose by 2.8% suggesting business spending growth for the quarter will probably top 15%. That’s not too shabby.

In fact, since 1970 in quarters in which real GDP growth is more than 2.5%, the S&P 500 increases by 2.84% (unannualized) on average. In Q3 2011, if the S&P finishes the quarter around 1,160, the index would have declined by just over 12%. With the exception of Black Monday in 1987 (Q4), no quarter in which real GDP grew by more than 2.5% would have seen worse equity performance than this one. Even if we assume GDP growth of at least 2.0% in Q3 (S&P 500 average gains of 2.78%), the 12% decline for the S&P 500 would be the third worst (after Black Monday and Q2 2002). We do of course have two more trading sessions to change this reality.

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