• Bank of America analysis shows the fourth quarter is historically the strongest for U.S. stock indices, with the Nasdaq 100 leading gains.
  • The so-called "Santa rally" is a key driver of December performance, with associated trends in bonds and commodities.
  • Technology stocks have risen 80% of the time in Q4, while energy and real estate sectors often lag.

As markets enter the final quarter of 2025, strategists at Bank of America are reminding investors of a persistent seasonal trend: Q4 is typically a boon for equities. Their analysis of historical data reveals that all major U.S. indices show positive average returns during this period, providing a tailwind for portfolios.

The S&P 500 has gained an average of 2.8% in the fourth quarter, according to the bank's research. The tech-heavy Nasdaq 100 sees even more robust performance, with an average climb of 6.2%, while small-caps, as represented by the Russell 2000, average a 4.6% increase. The trend is particularly pronounced in December, often fueled by the "Santa rally"—a period of investor optimism and year-end fund flows.

Sector performance is far from uniform. "Technology typically leads sector gains, rising 80% of the time," the strategists noted, suggesting a rotation into growth-oriented names. In contrast, energy and real estate have historically been the relative underperformers during the quarter.

The seasonal pattern extends beyond equities. Bond yields have a tendency to fall into year-end, while commodities show divergent paths: oil prices often weaken, and precious metals like gold tend to strengthen. This analysis arrives as Bank of America itself demonstrates solid operational performance, having recently reported $26.5 billion in revenue for the second quarter of 2025.

While historical patterns are no guarantee of future results, the assessment offers a strategic framework for investors navigating the coming months. The market's focus will remain on whether macroeconomic conditions, including Federal Reserve policy and inflation trends, will allow this long-standing seasonal strength to materialize once again.