This historical trend points to strong fourth quarter gains — and 2020 may be no exception

Ally Invest's Lindsey Bell won't give up on the fourth quarter.

Despite stimulus gridlock, election uncertainty and the coronavirus' path, the firm's chief investment strategist believes it's possible the S&P 500 will follow the positive historical trend.

"There's a lot to worry about," she told CNBC's "Trading Nation" on Friday. "But I am cautiously optimistic."

According to Bell, the S&P 500 typically sees an average gain of 3.9% in the fourth quarter — making it the best three months of the year.

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"We can still have a good fourth quarter once we get past some of these uncertainties that are in the marketplace," she said. "So, while we may not get 3.9%, I'm going to try to remain cautiously optimistic here."

However, with just 12 trading days in the books in the fourth quarter, the S&P 500 is already up 3.6%. Bell points out the bulk of the gains usually come in November and December, not October.

"Volatility is going to continue to be a key component in through the next couple months," she added. "It's a little difficult to blindly trust historical trends in a year like this. We're up against a lot in the next couple of months."

One of the biggest risks she highlights is fallout from the coronavirus aid package delay.

"The question mark is what is going to happen on the fiscal side as far as stimulus or fiscal aid goes for the consumer," said Bell, a CNBC contributor.

So far, there appears to be little impact. The latest government data shows September retail sales increased 1.9% versus the 0.7% Dow Jones consensus estimate.

"Consumers have also put themselves in a better financial position that they were going into the crisis by paying down some debt," Bell noted. "So, I think that consumers are in a position to weather the storm for a couple more months. But ultimately, fiscal aid is going to be needed."

Despite the risks, Bell does not think it's a bad time to enter the market. She speculates the economic recovery will continue even if there are setbacks along the way.

"We are in the later stages, at least I believe, of the coronavirus crisis, and we are still in positive stages of the reopening story," Bell said. "I'm starting to begin to look at some of those value oriented sectors like the financials… These are the guys that are going to pop the most because they have underperformed most significantly."

She also likes small caps, which are also closely tied to economic performance.

"These two might be a little bit early while we're still figuring out what that economic story is and how the economic trajectory plays out," Bell said. "But I'd rather be in too early than too late."


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