Q4 has just begun. And that’s great news since the fourth quarter is historically the best quarter of the year for stocks.
Since 1950, the S&P has gone up 79% of the time, with an average gain of 4.1%.
This year, however, has the potential to be much larger.
Because there’s a lot more going for the market than just the high-probability seasonal tendency.
That includes the soaring earnings outlook, which, by the way, is another reason to get excited. Q3 earnings season is just a couple of weeks away. And that too is great news since stocks typically go up during earnings season. (More on earnings in a bit.)
I will also count last month’s rate hike as bullish as well.
The Fed
After the Fed’s quarter point rate hike two weeks ago (the first one in 3 years), stocks have been trading higher ever since. In fact, the Nasdaq even made new all-time highs since then (two new ones to be exact), and the S&P is not far behind.
While the Fed penciled in one more rate hike by year’s end, that has recently been called into question given last week’s better-than-expected inflation report.
Easing Inflation
The Personal Consumption Expenditures (PCE) index (which is the Fed’s preferred inflation gauge), showed headline inflation at 3.4% y/y, in line with last month’s downwardly revised 3.4% (from 3.7%), and below estimates for 3.7%, while the core rate (ex-food & energy), was at 3.0% vs. last month’s downwardly revised 3.0% (from 3.3%), and the consensus for 3.3%.
Treasury Yields
There’s been much ado about rising Treasury yields as well. But there needn’t be.
With the Fed Funds Rate (FFR) at 3.88% midpoint, and the 10-yr yield at 5.28%, the spread is 140 bps.
Historically, over the past 40 years (1985-2025), the spread between the FFR and the 10-yr, has been 100 to 150 bps. The median is 120 bps.
With one more rate hike expected this year (assuming it even happens), that would put rates at 4.1%, and the spread at 118 with the current yield, which is right in line with the historical norm.
The point is, I’m not expecting the 10-yr to rise forever. Nor am I expecting the FFR to shoot up much more than expected either.
The rise in yields appears to be a simple reversion to the long-run median spread of 120 bps.
Crude Oil
Tensions in the Middle East continue. And reports that the U.S. is sending another aircraft carrier to the region is raising speculation of new escalation.
But crude oil has been falling over the last several days. Especially after reports last week that Middle East crude exports rose to 16.3M barrels per day, which is the highest since the war began.
That’s approximately 80% of pre-war levels. To be clear, Hormuz volume is only at 40% of pre-war levels. And that’s with Iran exports effectively at zero. But other Middle East routes used by Saudi Arabia, the UAE and Oman, to name a few, have increased significantly, putting combined shipments at just 20% below the pre-war baseline.
And that should cap oil. Ease inflation. And help put a lid on rates.
SEP
The recent Fed Announcement also included their quarterly Summary of Economic Projections (SEP).
And it painted a bullish picture for the economy.
As mentioned earlier, while they see one more rate hike this year, bringing the Fed Funds Rate to 4.1%, they also see it staying put for 2027, meaning no more hikes after that.
It also shows PCE headline inflation at 3.7% this year, but falling to 2.3% in 2027, with core inflation at 3.4% this year, then falling to 2.5% next year. But inflation has already started falling with both headline and core under the SEP. And that suggests rates could very well start falling sooner rather than later.
Additionally, the SEP also showed the Fed raising their GDP outlook for 2026 to 2.3% (up from their previous projection of 2.2%), with 2027 at 2.4% (up from their previous 2.3% estimate). Fed Chair Kevin Warsh noted that “the economy’s output is solid,” and that “capital expenditures and productivity are strong.”
I should also note that since then, Q2’26 GDP was revised higher to 2.2% (up from the previous estimate of 1.5%). And Q3’26, according to the latest GDPNow forecast from the Federal Reserve Bank of Atlanta, is pegged at 3.75%, which would be the fastest pace since Q4’23 (roughly three years).
Lastly, the Fed sees the unemployment rate at 4.1% for this year and next. That’s down from their previous forecast of 4.3% for both years. Mr. Warsh also said that “current unemployment rates are consistent with full employment,” and that “labor markets are solid and steady.”
That was underscored on Friday when the Bureau of Labor Statistics (BLS) reported 29,000 new jobs were created in September (46,000 in just the private sector). Not too hot and not too cold. And easily meeting or exceeding the estimated 15,000 jobs needed per month to maintain full employment at these levels.
It's clear that the economy is growing. And that’s great news for the market.
So, for those who wished they would have taken better advantage of the recent dip, or the entire rally since the year began (the S&P is up 12.8% YTD, and the Nasdaq is up 17.0%), the good news is that it looks like the next 3 months could be the best three months of the entire year.
History Repeats Itself
Last year saw the S&P 500 gain 16.4%. That was on top of 2024’s 23.3%, and 2023’s 24.2%.
The historic AI tech boom has been leading the way.
And it’s reminiscent of the dot-com tech boom in 1995-1999 when the market surged by double-digits each year for 5 long, glorious years in a row, resulting in a 220% increase for the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
I believe we could see the same thing again now.
And so does legendary trader Paul Tudor Jones. In a recent interview, he said the AI-driven bull market still has “another year or two to run,” and compared it to the late 1990’s tech boom.
That has been my sentiment all along, and comports with my expectation that we’ll see 5 years in a row of double-digit market gains, just like we did back then.
This year (2026), would be year 4, while 2027 would be year 5. But nobody says it has to stop there. With AI being touted as the most transformational tech breakthrough ever, it could very well last much longer.
Moreover, I think we can soar beyond ‘just’ a 20% gain.
Since 1988, only five times has the S&P had an annual gain of 30% or more. Just 5 times over the last 38 years.
But did you know that 2 of those 5 times happened in the 1995-1999 dot-com boom?
In 1995, it was up 37.6%. And in 1997 it was up 33.4%.
And the last time we saw a 30% gain was back in 2013.
We’re due for one, in my opinion.
Plus, with the AI boom being even bigger than the dot-com boom, driven by real earnings and real growth, if there ever was a reason to see a 30% gain, now is the time.
And AI will be one of the key drivers for stocks for years to come.
A recent comment underscoring the AI trade came from AMD CEO Lisa Su, who characterized the demand for AI as “insatiable,” and said her company alone could grow by 35% a year for the next 3-5 years because of that. In fact, she said the AI market is "faster than anything we've seen before.” And she predicted the AI data center market could grow to “$1 trillion” by 2030.
A resounding outlook for the scale of AI.
Here’s a few more, by NVIDIA CEO Jensen Huang:
“AI is the most powerful technology force of our time.”
“AI will revolutionize every industry, from healthcare to transportation.”
“We are at the beginning of a new computing era.”
And while it transforms the world as we know it, it also has the potential to transform one’s portfolio.
But in addition to the ongoing AI boom, there’s plenty of other reasons to expect another year of big gains.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy These Ultimate Four Stocks
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by Zacks' experts because they present the greatest upside for Q4:
Stock #1: A critical “picks-and-shovels” AI play operating outside utility bottlenecks
Stock #2: An engineering powerhouse keeping AI from crashing the grid
Stock #3: A tech behemoth anchoring Fortune 500 decision-making
Stock #4: A hidden supply-chain engine mastering domestic comfort
The deadline to download our just-released Ultimate Four Special Report is Sunday, October 4.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
A Productivity Boom Is Underway Too
We are now in the strongest productivity environment since the late-1990’s tech boom.
In fact, full-year productivity growth is trending at 2.0%, making it the strongest period in more than 25 years.
What’s noteworthy is that productivity growth typically slows in the late stages of expansion as capacity tightens and incremental gains are harder to extract.
But it accelerates at the beginning of a new growth phase when new technologies are adopted, and businesses unlock efficiencies that weren’t previously possible.
That’s why people are comparing it to the late 1990’s. Productivity jumped back then due to the technology gains from the internet boom.
And we could be seeing the same thing now, thanks to the technology gains from the AI boom.
The pattern is clear, as productivity jumps, broader economic expansion follows. And the current above-trend productivity gains are another marker for potentially big growth ahead – for the economy and the market.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
And it’s pointing to strong growth.
Q2’26 earnings season wrapped up the other month, and the results were stellar with a 45.6% EPS growth rate.
Q3’26 earnings season, which is just a couple weeks away, is forecast at 24.1%.
Q4’26 is forecast at 26.6%.
And Q1’27 is forecast at 21.5%.
Wow!
These numbers are nothing short of spectacular.
Once again, earnings are the key driver of stock prices.
And that’s why it looks like there’s a lot more upside to go for the market.
Stock Picking Secrets Of The Pros
So, how do you fully take advantage of the market right now?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 29 of the last 38 years (a 76% win ratio), with an average annual return of nearly 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
Did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success and put you well on your way to beating the market.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So, the next step is to get that list down to a smaller, actionable list of stocks that you can buy.
And one of the best ways to do that is to see what stocks the pros, who use these methods, are picking.
Whether you’re a growth investor, or a value investor, prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
This applies to large-caps and small-caps, biotech and high-tech, ETFs, stocks under $10, stocks about to surprise, even options, and everything in between.
Regardless of which one fits your personal style of trade, just be sure you’re following proven profitable methods and strategies that work, from experts who have demonstrated their ability to beat the market.
The best part about these strategies and stock picks (aside from the returns), is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start confidently getting into better stocks on your very next trade.
The Pros' Best Picks for Today
Here's an easy way to find them:
Download our just-released Ultimate Four Special Report.
These are 4 stocks handpicked by our experts. Each has strong fundamentals and exceptional growth potential. They're ideally suited to soar through Q4 and far beyond.
Stock #1: A critical “picks-and-shovels” AI play operating outside utility bottlenecks
Stock #2: An engineering powerhouse keeping AI from crashing the grid
Stock #3: A tech behemoth anchoring Fortune 500 decision-making
Stock #4: A hidden supply-chain engine mastering domestic comfort.
The total cost is only $1, and there's no obligation to spend a cent more.
While future success isn’t guaranteed, recent Ultimate Four recommendations gained as much as +37.8%, +51.9%, +75.3%, and +81.5% in a single quarter.¹ The picks in this new report may rival or even surpass those returns.
Don't wait. The deadline to download the Ultimate Four report for just $1 is midnight Sunday, October 4.
See Our Ultimate Four stocks now >>
All the best,
Kevin
Kevin Matras serves as Executive Vice President of Zacks.com and is responsible for all of its leading products for individual investors. He invites you to download Zacks' just-released Ultimate Four Special Report before this weekend's deadline.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades.
View the Zacks #1 Rank List
Image: Bigstock
Why The Next 3 Months Are Poised To Be The Best 3 Months Of The Year
Q4 has just begun. And that’s great news since the fourth quarter is historically the best quarter of the year for stocks.
Since 1950, the S&P has gone up 79% of the time, with an average gain of 4.1%.
This year, however, has the potential to be much larger.
Because there’s a lot more going for the market than just the high-probability seasonal tendency.
That includes the soaring earnings outlook, which, by the way, is another reason to get excited. Q3 earnings season is just a couple of weeks away. And that too is great news since stocks typically go up during earnings season. (More on earnings in a bit.)
I will also count last month’s rate hike as bullish as well.
The Fed
After the Fed’s quarter point rate hike two weeks ago (the first one in 3 years), stocks have been trading higher ever since. In fact, the Nasdaq even made new all-time highs since then (two new ones to be exact), and the S&P is not far behind.
While the Fed penciled in one more rate hike by year’s end, that has recently been called into question given last week’s better-than-expected inflation report.
Easing Inflation
The Personal Consumption Expenditures (PCE) index (which is the Fed’s preferred inflation gauge), showed headline inflation at 3.4% y/y, in line with last month’s downwardly revised 3.4% (from 3.7%), and below estimates for 3.7%, while the core rate (ex-food & energy), was at 3.0% vs. last month’s downwardly revised 3.0% (from 3.3%), and the consensus for 3.3%.
Treasury Yields
There’s been much ado about rising Treasury yields as well. But there needn’t be.
With the Fed Funds Rate (FFR) at 3.88% midpoint, and the 10-yr yield at 5.28%, the spread is 140 bps.
Historically, over the past 40 years (1985-2025), the spread between the FFR and the 10-yr, has been 100 to 150 bps. The median is 120 bps.
With one more rate hike expected this year (assuming it even happens), that would put rates at 4.1%, and the spread at 118 with the current yield, which is right in line with the historical norm.
The point is, I’m not expecting the 10-yr to rise forever. Nor am I expecting the FFR to shoot up much more than expected either.
The rise in yields appears to be a simple reversion to the long-run median spread of 120 bps.
Crude Oil
Tensions in the Middle East continue. And reports that the U.S. is sending another aircraft carrier to the region is raising speculation of new escalation.
But crude oil has been falling over the last several days. Especially after reports last week that Middle East crude exports rose to 16.3M barrels per day, which is the highest since the war began.
That’s approximately 80% of pre-war levels. To be clear, Hormuz volume is only at 40% of pre-war levels. And that’s with Iran exports effectively at zero. But other Middle East routes used by Saudi Arabia, the UAE and Oman, to name a few, have increased significantly, putting combined shipments at just 20% below the pre-war baseline.
And that should cap oil. Ease inflation. And help put a lid on rates.
SEP
The recent Fed Announcement also included their quarterly Summary of Economic Projections (SEP).
And it painted a bullish picture for the economy.
As mentioned earlier, while they see one more rate hike this year, bringing the Fed Funds Rate to 4.1%, they also see it staying put for 2027, meaning no more hikes after that.
It also shows PCE headline inflation at 3.7% this year, but falling to 2.3% in 2027, with core inflation at 3.4% this year, then falling to 2.5% next year. But inflation has already started falling with both headline and core under the SEP. And that suggests rates could very well start falling sooner rather than later.
Additionally, the SEP also showed the Fed raising their GDP outlook for 2026 to 2.3% (up from their previous projection of 2.2%), with 2027 at 2.4% (up from their previous 2.3% estimate). Fed Chair Kevin Warsh noted that “the economy’s output is solid,” and that “capital expenditures and productivity are strong.”
I should also note that since then, Q2’26 GDP was revised higher to 2.2% (up from the previous estimate of 1.5%). And Q3’26, according to the latest GDPNow forecast from the Federal Reserve Bank of Atlanta, is pegged at 3.75%, which would be the fastest pace since Q4’23 (roughly three years).
Lastly, the Fed sees the unemployment rate at 4.1% for this year and next. That’s down from their previous forecast of 4.3% for both years. Mr. Warsh also said that “current unemployment rates are consistent with full employment,” and that “labor markets are solid and steady.”
That was underscored on Friday when the Bureau of Labor Statistics (BLS) reported 29,000 new jobs were created in September (46,000 in just the private sector). Not too hot and not too cold. And easily meeting or exceeding the estimated 15,000 jobs needed per month to maintain full employment at these levels.
It's clear that the economy is growing. And that’s great news for the market.
So, for those who wished they would have taken better advantage of the recent dip, or the entire rally since the year began (the S&P is up 12.8% YTD, and the Nasdaq is up 17.0%), the good news is that it looks like the next 3 months could be the best three months of the entire year.
History Repeats Itself
Last year saw the S&P 500 gain 16.4%. That was on top of 2024’s 23.3%, and 2023’s 24.2%.
The historic AI tech boom has been leading the way.
And it’s reminiscent of the dot-com tech boom in 1995-1999 when the market surged by double-digits each year for 5 long, glorious years in a row, resulting in a 220% increase for the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
I believe we could see the same thing again now.
And so does legendary trader Paul Tudor Jones. In a recent interview, he said the AI-driven bull market still has “another year or two to run,” and compared it to the late 1990’s tech boom.
That has been my sentiment all along, and comports with my expectation that we’ll see 5 years in a row of double-digit market gains, just like we did back then.
This year (2026), would be year 4, while 2027 would be year 5. But nobody says it has to stop there. With AI being touted as the most transformational tech breakthrough ever, it could very well last much longer.
Moreover, I think we can soar beyond ‘just’ a 20% gain.
Since 1988, only five times has the S&P had an annual gain of 30% or more. Just 5 times over the last 38 years.
But did you know that 2 of those 5 times happened in the 1995-1999 dot-com boom?
In 1995, it was up 37.6%. And in 1997 it was up 33.4%.
And the last time we saw a 30% gain was back in 2013.
We’re due for one, in my opinion.
Plus, with the AI boom being even bigger than the dot-com boom, driven by real earnings and real growth, if there ever was a reason to see a 30% gain, now is the time.
And AI will be one of the key drivers for stocks for years to come.
A recent comment underscoring the AI trade came from AMD CEO Lisa Su, who characterized the demand for AI as “insatiable,” and said her company alone could grow by 35% a year for the next 3-5 years because of that. In fact, she said the AI market is "faster than anything we've seen before.” And she predicted the AI data center market could grow to “$1 trillion” by 2030.
A resounding outlook for the scale of AI.
Here’s a few more, by NVIDIA CEO Jensen Huang:
“AI is the most powerful technology force of our time.”
“AI will revolutionize every industry, from healthcare to transportation.”
“We are at the beginning of a new computing era.”
And while it transforms the world as we know it, it also has the potential to transform one’s portfolio.
But in addition to the ongoing AI boom, there’s plenty of other reasons to expect another year of big gains.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy These Ultimate Four Stocks
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by Zacks' experts because they present the greatest upside for Q4:
Stock #1: A critical “picks-and-shovels” AI play operating outside utility bottlenecks
Stock #2: An engineering powerhouse keeping AI from crashing the grid
Stock #3: A tech behemoth anchoring Fortune 500 decision-making
Stock #4: A hidden supply-chain engine mastering domestic comfort
The deadline to download our just-released Ultimate Four Special Report is Sunday, October 4.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
A Productivity Boom Is Underway Too
We are now in the strongest productivity environment since the late-1990’s tech boom.
In fact, full-year productivity growth is trending at 2.0%, making it the strongest period in more than 25 years.
What’s noteworthy is that productivity growth typically slows in the late stages of expansion as capacity tightens and incremental gains are harder to extract.
But it accelerates at the beginning of a new growth phase when new technologies are adopted, and businesses unlock efficiencies that weren’t previously possible.
That’s why people are comparing it to the late 1990’s. Productivity jumped back then due to the technology gains from the internet boom.
And we could be seeing the same thing now, thanks to the technology gains from the AI boom.
The pattern is clear, as productivity jumps, broader economic expansion follows. And the current above-trend productivity gains are another marker for potentially big growth ahead – for the economy and the market.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
And it’s pointing to strong growth.
Q2’26 earnings season wrapped up the other month, and the results were stellar with a 45.6% EPS growth rate.
Q3’26 earnings season, which is just a couple weeks away, is forecast at 24.1%.
Q4’26 is forecast at 26.6%.
And Q1’27 is forecast at 21.5%.
Wow!
These numbers are nothing short of spectacular.
Once again, earnings are the key driver of stock prices.
And that’s why it looks like there’s a lot more upside to go for the market.
Stock Picking Secrets Of The Pros
So, how do you fully take advantage of the market right now?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 29 of the last 38 years (a 76% win ratio), with an average annual return of nearly 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
Did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success and put you well on your way to beating the market.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So, the next step is to get that list down to a smaller, actionable list of stocks that you can buy.
And one of the best ways to do that is to see what stocks the pros, who use these methods, are picking.
Whether you’re a growth investor, or a value investor, prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
This applies to large-caps and small-caps, biotech and high-tech, ETFs, stocks under $10, stocks about to surprise, even options, and everything in between.
Regardless of which one fits your personal style of trade, just be sure you’re following proven profitable methods and strategies that work, from experts who have demonstrated their ability to beat the market.
The best part about these strategies and stock picks (aside from the returns), is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start confidently getting into better stocks on your very next trade.
The Pros' Best Picks for Today
Here's an easy way to find them:
Download our just-released Ultimate Four Special Report.
These are 4 stocks handpicked by our experts. Each has strong fundamentals and exceptional growth potential. They're ideally suited to soar through Q4 and far beyond.
Stock #1: A critical “picks-and-shovels” AI play operating outside utility bottlenecks
Stock #2: An engineering powerhouse keeping AI from crashing the grid
Stock #3: A tech behemoth anchoring Fortune 500 decision-making
Stock #4: A hidden supply-chain engine mastering domestic comfort.
The total cost is only $1, and there's no obligation to spend a cent more.
While future success isn’t guaranteed, recent Ultimate Four recommendations gained as much as +37.8%, +51.9%, +75.3%, and +81.5% in a single quarter.¹ The picks in this new report may rival or even surpass those returns.
Don't wait. The deadline to download the Ultimate Four report for just $1 is midnight Sunday, October 4.
See Our Ultimate Four stocks now >>
All the best,
Kevin
Kevin Matras serves as Executive Vice President of Zacks.com and is responsible for all of its leading products for individual investors. He invites you to download Zacks' just-released Ultimate Four Special Report before this weekend's deadline.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades.