Image Source: Pexels
 

Wall Street bulls continue to defy the odds as stocks climb the proverbial wall of worry. This week, the Nasdaq, S&P 500 Index, and Dow Jones Industrial Average each reached fresh all-time highs, while the small-cap Russell 2000 Index hovers just below them. Meanwhile, despite the ‘Liberation Day’ panic of early 2025, the tech-heavy Nasdaq 100 Index is enjoying a banner year, gaining some 23% thus far. Despite the robust performance, stocks are likely to melt up and even gain momentum into year-end for five reasons, including:

1.      Muted Investor Sentiment: Many investors may be surprised to learn that despite the robust performance and all-time highs for equities, the average investor remains fearful. For instance, the latest data from the CNN Fear/Greed Index registered a “Fear” reading. In other words, despite the strong market returns, investors are far from euphoric and may even be considered skeptical at this juncture – a bullish contrarian signal.
 

Image Source: Zacks Investment Research
 

2.      Bullish Q4 Seasonality Looms: Since 1950, Q4 has been the best-performing quarter for US equities. Typically, stocks experience some weakness in Q3, but bottom on average on October 27^th. Additionally, institutional investors will likely be forced to ‘window dress’ their portfolios and chase performance into year-end.
 

Image Source: Carson Investment Research
 

3.      Earnings Season is Off to a Robust Start: According to market research from BBG, 70% of S&P 500 reporters have exceeded sales estimates, the highest proportion of positive surprises in about four years. 85% of benchmark companies have beat on earnings, just 14% have missed. Investors should get more good news when companies like Advanced Micro Devices (AMD - Free Report), CoreWeave (CRWV - Free Report), Arm Holdings (ARM - Free Report), Meta Platforms (META - Free Report), and Apple (AAPL - Free Report) report in the coming days.

4.      Trade Tensions are Easing: One of the most significant market headwinds has been investor concern about trade tensions between the world’s two largest economies – China and the US. However, Trump administration trade officials recently provided some welcome news, stating that US-China trade talks are moving into the final stages. US President Donald Trump and Chinese President Xi Jinping are scheduled to meet on October 30^th in South Korea in another sign of easing trade tensions between the two economic rivals.

5.      The Return of a Dovish Federal Reserve: Fed Chair Jerome Powell recently cut rates for the first time after a lengthy pause. Historically, S&P 500 returns are stunning after such pauses.
 

Image Source: Ned Davis Research
 

Bottom Line
 

Despite investor fears, US stocks are primed to melt up into the historically strong fourth quarter. Easing trade fears, a Dovish Fed, and robust earnings are bullish tailwinds for stocks into year-end.

More By This Author: