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The third quarter was a dud for stocks, but the fourth quarter could be full of surprises

Traders work on the floor of the New York Stock Exchange.

Lucas Jackson | Reuters

The third quarter wraps up in the week ahead with stocks just slightly higher for the period, after a summer of zigzag moves.

The market faces some of the same challenges in the final quarter of the year, including Brexit, the trade war with China, sluggishness in the global economy and the impeachment inquiry into President Donald Trump. By mid-quarter, the U.S. presidential election will be just a year away, and it could become a factor that could start to trigger market volatility.

Stocks were lower in the past week, with the S&P 500 down 1%, finishing at 2,961.

For the year to date, the S&P 500 is up 18.1%, but in the third quarter, so far, it added just 0.7%. The S&P started the quarter at 2,752, went as high as 3,028 before falling back. It has chopped in a range down to about 2,860, and has repeatedly struggled to get back to its high.

“We think you stay within the range — 2,820 to 3,030,” said Julian Emanuel, BTIG head equities and derivatives strategist. Emanuel’s year-end target has been 3,000.

“We see new highs, whether they happen in the fourth quarter or in 2020, as a function of geopolitical developments. From our point of view, the developments of the last several weeks, particularly [Sen. Elizabeth] Warren rising in the polls, increases in our mind the probability you get some sort of deal with China,” he said.

Analysts said there could be more volatility because of the efforts by House Democrats to impeach Trump. The investigation into the president has to do with his withholding of aid to Ukraine and whether it was tied to a request to get dirt on front running Democratic presidential candidate former Vice President Joe Biden and his son Hunter.

Warren, D-Mass., whose tax and other policies are viewed as unfriendly to markets, is catching up with Biden in the polls, and some strategists see her benefiting from any negative news on Hunter Biden’s dealings with a Ukraine gas company. Emanuel said if Warren continues to gain, that may encourage China to move forward with a trade deal with Trump, for fear making a deal with Warren would be more difficult.

Besides political headlines, there is some key data coming out in the week ahead, including Friday’s September employment report, and ISM and PMI manufacturing data on Tuesday. The economy is expected to have added 145,000 jobs, above the 130,000 last month, while the unemployment rate is expected to stay steady at 3.7%, according to Refinitiv.

“We expect another month of census-related hiring to push public sector payrolls higher and, as a result, we forecast only 120k increase in private sector payrolls,” notes Michael Gapen, chief U.S. economist at Barclays. “Our forecast for private sector employment gains in September would represent some improvement relative to August, but our forecast overall remains consistent with our outlook for slower employment growth on the heels of deceleration in economic activ