Has the Q4 Equity Correction Finally Arrived?

Summary

The presenter argues that a fourth-quarter correction in the U.S. stock market may already be underway, though it is not certain. Midterm-election seasonality, he stresses, is not a reliable forecast. The S&P 500 remains close to its highs, while several other markets have weakened first—a pattern he says has appeared in past corrections.

Market levels and historical comparisons

• The S&P 500 was down about 1% on Friday and roughly 2% from its high.
• The Russell 2000 was down about 11%, the Dow Jones about 7–8%, and the Nasdaq about 7–7.5%. The presenter’s broader point is that weakness has spread from smaller-cap and rate-sensitive stocks toward technology, while the S&P 500 has held up so far.
• South Korean equities, which the presenter describes as exposed to semiconductor manufacturing, had fallen about 24% since late September.
• The presenter cites typical correction ranges of 10–20%, while noting that not every midterm-election year produces one. He says this seasonal pattern has occurred about 70% of the time.

Historical examples cited include:

• 2018: The Russell began falling before the S&P 500 and eventually declined about 27%. The S&P 500 also fell more than 10% before the midterm election.
• 2022: The S&P 500 fell about 27–28% from its January high to its October low, before the election.
• 2014: The market fell about 10% from a September peak into mid-October.
• 2006 and 2010: Cited as midterm years without a major correction.
• 1987: The presenter says the current setup does not resemble the much larger rise and fall of that year.

Macro factors and possible market path

The presenter discusses the possibility that the Federal Reserve will not raise rates at its October meeting. The cited probability of no hike is about 84.5%, despite relatively hot inflation reports.

He suggests that 10-year Treasury yields could rise again if the Fed pauses, putting renewed pressure on rate-sensitive stocks. He compares this possibility with yield movements around the 2018 and 2022 midterms.

Other points include:

• The Russell could fall about 17% from its peak if it reaches a cited trend line—roughly another 6% below current levels.
• The presenter’s tentative scenario is an initial decline, a possible rebound before the midterm election, and potentially another decline afterward, broadly resembling 2018. He emphasizes that this is a guess, not a certainty.
• Rising energy prices are presented as another potential source of pressure. Brent crude had exceeded its September high; if WTI also broke its September peak, the presenter cited 107 as a possible level. Oil had risen for about seven consecutive days, and the Energy Select Sector SPDR (XLE) had reached a new high.
• The presenter argues that markets may be paying less attention to headlines about the Middle East and more attention to actual events. He expects oil to remain under upward pressure until the situation changes.

Crypto and IPO implications

The presenter describes a “risk curve”: altcoins → Bitcoin → equities such as the S&P 500. In this framing, Bitcoin’s move into a bear trend previously interrupted rotation into altcoins; a stock-market correction could, in turn, interrupt a Bitcoin rally.

The presenter also discusses possible Anthropic and OpenAI IPOs. He says volatile markets could lead companies to delay IPOs in pursuit of better valuations and cautions that an IPO is not automatically a short-term bullish signal. As an example, the S&P reportedly fell about 5% in the summer before the SpaceX IPO.

Approach and stated investing practice

To assess whether a correction is broadening, the presenter suggests watching for weakness to spread from riskier or more rate-sensitive markets—such as the Russell, Nasdaq, and South Korean equities—to the S&P 500.

He also recommends comparing current price action and Treasury-yield behavior with prior midterm years, while treating historical patterns as context rather than a guarantee. The presenter says he buys index funds monthly rather than trying to time short-term market moves.

Disclosure and source

Disclosure: No explicit financial-advice disclaimer appears in the subtitles.

Presenter/source: Benjamin Cowen, presenting on Equity Verse / Into the Cryptoverse.