Why Stocks May Be Set for Fourth-Quarter Gains

New York Stock ExchangeDon't be surprised if the market gets off to a choppy, sluggish start this month, says Cort Gwon, director of trading strategies and research at FBN Securities. But longer term, equities look poised to follow up a strong third-quarter with more gains into the end of the year.

Stocks just enjoyed their best September in 71 years -- meaning a little profit-taking is to be expected -- and October is a historically volatile month in any case. "The fourth quarter looks very bright me," Gwon says. "The signs are there for a recovery in the economy. But the most important thing is you have a lot of cash on the sidelines."

Corporate balance sheets are at record levels, bulging with nearly $2 trillion in cash. That bodes well for more market-boosting deal activity and share buybacks. Meanwhile, bond mutual funds are enjoying record inflows, largely at the expense of domestic stock funds. At some point, some of those fixed-income investors are going to grow weary of 1% and 2% returns and move back into equities, Gwon says.

For more on Gwon's outlook from the floor of the New York Stock Exchange (NYX), see the video below.

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Markets

DJIA 21,812.09 -87.80 -0.40%
NASDAQ 6,278.41 -19.07 -0.30%
S&P 500 2,444.04 -8.47 -0.35%
NIKKEI 225 19,434.64 50.80 0.26%
HANG SENG 27,401.67 246.99 0.91%
DAX 12,174.30 -55.04 -0.45%
USD (per EUR) 1.18 0.00 0.41%
USD (per CHF) 0.97 0.00 -0.32%
JPY (per USD) 108.97 -0.76 -0.69%
GBP (per USD) 1.28 0.00 -0.18%

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