Key Points
- Q4 averages a 4.3% historical return for theS&P 500returns, topping other quarters since 1950.
- Holiday shopping and year-end earnings drive seasonal strength.
- The period also marks a return of investors to markets by investors who “sold in May and went away,” boosting capital inflows starting in October.
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October kicks off the fourth quarter, a period that has consistently delivered the strongest gains for U.S. equities. Data from the S&P 500 shows its performance for each period:
Q1:1.8%
Q2:2.4%
Q3:1.8%
Q4:4.3%
Much of this edge stems from seasonal factors, including the Christmas holiday shopping surge that boosts retail and consumer sectors from November through December. Strong earnings reports in Q4 also often fuel optimism, as companies close out the year with solid results.
The quarter also aligns with the close of the old investing adage to “sell in May and go away,” where investors who sidelined themselves during the slower summer months return to the markets adding capital, driving demand.
In election years like 2024, Q4 volatility can add further upside as policy clarity emerges. Historically, 70% of Q4 periods since 1928 ended positively, compared to 65% for other quarters. This pattern held in 2024, with the index up 5.2% amid tech rebounds.
For 2025, analysts expect similar momentum, supported by cooling inflation and potential rate cuts, setting the stage for broad market advances. Government shutdowns, like the one we have now, also see stocks rise 17% on average in the 12 months following on.
As portfolios reposition for the end of the year, Q4 remains a high-reward window, and the following two stocks are poised to reward investors.
Vertiv Holdings (VRT)
Vertiv Holdings(NYSE:VRT) is a provider of critical power and thermal management solutions for data centers. VRT stock has surged on the artificial intelligence (AI) infrastructure boom, with shares climbing over 42% year-to-date, reflecting explosive demand for its uninterruptible power supplies and liquid cooling systems.
As hyperscalers likeMicrosoft(NASDAQ:MSFT) and Google expand AI clusters, the need for reliable, efficient infrastructure intensifies. This company reported second quarter revenues of $2.07 billion, up 24% year-over-year, with net income jumping 120% to $185.8 million. Orders grew 18%, signaling sustained backlog into Q4. It maintains its position as a leading in modular data center solutions.
Loading stock data...Wall Street sees further upside. Analysts maintain a consensus “Buy” rating, with price targets averaging $145 per share, implying they see it as somewhat overvalued at current levels around $161 per share.Goldman Sachsrecently set a price target of $159.
Upcoming Q3 earnings later this month could move the stock higher if its performance meets or exceeds guidance affirms 20% to 24% organic growth. With data center demand white hot, it’s possible Vertiv could easily beat both internal estimates and those of analysts expecting revenue to rise 25%.
Challenges like supply chain tightness persist, but partnerships withNvidia(NASDAQ:NVDA) for AI-optimized cooling mitigate those risks. With global data center capital expenditures from tech giants projected at around $350 billion in 2025, this stock positions investors at the epicenter of the AI buildout, ready to capture Q4’s tech tailwinds.
Arm Holdings (ARM)
AI is also setting upArm Holdings(NASDAQ:ARM) to be a big Q4 winner. The designer of energy-efficient processor architectures powers 95% of premium smartphones and is expanding into AI and automotive chips. Its American Depositary Receipts (ADR) have gained 23% in 2025 so far, driven by licensing deals withQualcomm(NASDAQ:QCOM) andApple(NASDAQ:AAPL).
Fiscal first-quarter results at the end of July were disappointing, with revenue up 12% to $1.02 billion — the second straight quarter above the billion-dollar threshold — largely due to a 25% increase in royalty revenue, but profits tumbled 42% to $130 million.
Loading stock data...What worried investors more was guidance for Q2, which indicated revenue would be down or slightly up sequentially. Analysts are also worried about Arm’s plan to begin designing its own chips. Yet if the chip designer can execute on this strategy, it could open up new revenue possibilities beyond royalties and licensing. Analysts maintain a consensus “Buy” rating, however, and a $168 per share price target suggests 10% upside from current $156 per share levels.
Key catalysts include royalties from new iPhone launches and PC chip transitions via clients likeMediaTek. The firm’s total addressable market exceeds $200 billion, spanning cloud servers to edge devices. Recent Qualcomm integration of its latest tech validates the ecosystem lock-in. While breaking into the competitive chip market does carry risk, the payoff potential is huge. AI is shifting to edge computing and ARM’s IP moat ensures recurring revenue streams while exploring new opportunities. It makes the stock a prime pick for Q4’s semiconductor advance.
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