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History shows fourth-quarter rebound may be ahead

NYSE markets
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As investors brace for the worst quarterly loss for stocks in four years, all hope may not be lost for a fourth-quarter comeback, if history is any guide.

In the past three months, global indexes sold off as fears of an economic slowdown sent equities across the board into correction territory, marked by declines greater than 10 percent from their highs.

But as the battle between the bulls and the bears ensues, historical data show that U.S. stocks are about to enter a seasonally merry time.

Since 1995, the last three months of the year have been notoriously bullish for the stock market with the S&P 500 posting an average gain of 5 percent—by far the best quarterly return of all four quarters.

"In our view, conditions are coming into place for a seasonal Q4 rally," said Ari Wald, head of technical analysis at Oppenheimer. "In fact, starting October in a downtrend has been followed by the best performance of any month, whether in an uptrend or downtrend, since 1950."

Here's what seasonality shows are the best areas of the market as the year comes to an end:

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