September’s Best Return in a Decade Forecasts Big Q4 By LUCAS DOWNEY, CONTRIBUTING EDITOR, TradeSmith Daily The S&P 500 just polished off its best year-to-date return since 1997: up 20.8% through September. While that may not come as a surprise, maybe this will: September’s big surge of 2% is the best monthly gain since 2013. Septembers often bring pain and discomfort for investors. Not this time. It bucked the trend. And historically, that’s a bullish blessing… leading to market-beating gains ahead. We’ve got a powerful signal study to unpack today, which has all the proof. And as a bonus, we’ll discuss a high-performing stock I’ve spotted that looks ideal to ride the continuation wave. But before we blow the bullhorn, let’s review the latest market landscape. S&P 500’s Gigantic Move is Best Since 1997 Through the past six decades of market history, we’ve learned to expect 10% average gains per year. Sometimes it’s less, and sometimes it’s more. Then there’s 2024, which has doubled that expectation through the first nine months. Below shows how the SPDR S&P 500 ETF (SPY) has ripped nearly 21% this year: 
The rally hasn’t always been smooth sailing. Recall that early August saw a sharp dive when the CBOE Volatility Index (VIX) closed at about 38. Investors quickly bought the dip in stocks. They scooped the shallower early September dip, too… so much so, it’s easy to forget that September had any pullback at all. We were outspoken about the potential for a September swoon. Our message was simple: Build an all-star stock list ahead of any turbulence. The dip didn’t last long. After falling about 4% to start the month, the reversal saw us close up 2%, its best performance since 2013. Here’s a quick view of the month that was. The dip turned into a rip: 
As I was crunching numbers this week, the S&P’s 2% lift in September jumped off the page. If you go back to 1990, we’ve only seen a September gain of more than 1% 12 other times. Out of 35 years, that equates to just 37% of the time. Here’s why this is important… If you tally up all Q4 returns for the S&P 500 since 1990, you’ll find that the final quarter of the year has averaged a 4.96% gain. Not bad! However, if you single out the years when the month of September gains at least 1%, the expected fourth-quarter return jumps to 6.83%. For those keeping score, that’s a 37.7% jump in expected returns: 
So, if you were thinking about cashing out, you may want to think twice. Big momentum in September suggests market-beating returns in the months ahead. Now that we’re armed with historical evidence, how can we best position for a northbound drift? You could plop some money in the S&P 500 and call it a day… But that’s not super exciting, if you ask me. A better bet might be to wager on a high-ranking stock with a killer seasonal tailwind up ahead. And that’s where we find ourselves with earth-mover Caterpillar (CAT). The machinery giant turns 100 next year. And on a three-month basis, CAT has absolutely crushed the overall market, with a 19.3% gain versus 5.3% for the SPY: 
Part of the outperformance is surely due to the machinery needed to help with infrastructure challenges in this country. As storms effect more and more towns, rebuilding needs only increase. But I’m showcasing the name today due to the seasonal factor I found using TradeSmith’s seasonality tool. Beginning in October through Dec. 26, Caterpillar has averaged better than a 14% return in the last 15 years, with gains 86% of the time: 
Let’s take stock of where we stand: - Big Septembers forecast big Q4s.
- Caterpillar stock has had a good run, and now it’s scheduled for another three-month liftoff phase.
All that’s left to do is pop the hood on this machinery giant. To do that, let’s check in on our greenlight spotter: Jason Bodner’s Quantum Score. This all-weather ranking system instantly sums up a stock’s fundamental and technical picture. A reading above 70 is the “go zone.” CAT scores a whopping 81 – making it a heavy-duty favorite for near-term upside: 
With Caterpillar sporting a total yield of 3.9% (2.5% buyback + 1.4% dividend), coupled with a modest 1.69 PE/G ratio, and 36.6% net income margin expansion… I’m siding with the Quantum Score on this one – this tractor has more upside to plow. If you want more of my thoughts on CAT and other infrastructure plays, check out my latest Power Trends+ video. As I wrap up, one more thing to keep in mind: Election jitters are sure to send stocks zigging and zagging up until the vote. But be cheerful rather than fearful as we head into the final stretch of the year. Arm yourself NOW with an all-star stock list and cutting-edge data with TradeSmith. For more on the Quantum Score, Jason’s unique expertise that lead to its formulation, and the biggest advantage it gives you over other stock-pickers, go here to watch a free presentation on the strategy. Regards, Lucas Downey
Contributing Editor, TradeSmith Note from Michael Salvatore, Editor, TradeSmith Daily: There’s another theme that’s looking good for the fourth quarter – and far into the future: automation and AI. Once again, these themes are grabbing the headlines: as I wrote about yesterday, dockworkers at U.S. ports are striking for higher wages (to keep up with inflation) and assurances that they won’t be replaced by technology (which is our best shot at combating inflation). Other industries, however, are rapidly and aggressively embracing automation. Transportation, for one, is becoming a completely new experience in major U.S. cities like Los Angeles, Phoenix, and of course San Francisco thanks to the advent of self-driving cars. Rides in Google’s Waymo taxis are becoming the new normal there, just like city dwellers were the first to adopt Uber and Lyft – before ride-sharing services became the standard across the country. After all – just like Uber when it first started out – Waymo fares are often cheaper. And at least you don’t have to worry about a self-driving car system texting its friends as it rolls along at highway speeds. If you don’t have firsthand experience with this transformation, I highly recommend checking out Luke Lango’s new research on the topic. Luke lives in Silicon Valley, has a lot of connections there, and has found a unique way to invest in the trend. He believes that his $3 stock pick, a supplier for Tesla’s Robotaxi project, could lift off in a major way next Thursday, Oct. 10, when Elon Musk plans to unveil the prototype. Click here to sign up for Luke’s free briefing on Monday to prepare for major upside. | 
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