The stock market has risen steadily this year, and as April approaches, investors have reason to expect more, given that month’s track record of strong stock performances.
After gaining 24% last year, the S&P 500 Index – the benchmark used to measure the overall performance of stocks – continued its bullish run into 2024 by posting a gain of nearly 11% in the first quarter of 2024.
This is welcome news for investors who have recently given that the index, as well as the Dow Jones Industrial Average and the Nasdaq, reached record levels in the first quarter of the year.
However, overshadowing all of this is the uncertainty surrounding the Federal Reserve’s decision on when to begin cutting interest rates. According to data from the American Association of Individual Investors, bullish sentiment fell from 51.7% in the first week of March to 43.2% last week, demonstrating a more reserved outlook among investors.
But as April arrives, there’s new reason for optimism. Historically, April tends to be a banner month for the stock market. And while Frthe last performance is never indicative of how the actions will behave Going forward, look at seasonality can supply detailed information on the typical performance of stocks in certain periods of the year.
Is April a good month for the stock market?
Second Reuters, since 1945, April and December have been considered the best performing months of the year for stocks, with an average return of 1.6%. (September is notoriously the worst, with an average loss of -0.6%.)
During recessionary periods, April’s positive performance can be even more pronounced. In 2008 and 2009, in the midst of the Great Recession, April produced returns of 4.8% and 9.4%, respectively. And in the wake of the arrival of COVID-19, April 2020 saw a whopping 12.7% gain – the 12th best monthly performance for the S&P 500 dating back to 1928.
One theory behind April’s positive performance is that investors receive tax refunds that month and inject that money into the market pushing prices higher. Regardless of the cause, April is historically such a strong month for stocks that it has posted losses only twice in the last 18 years (in 2012 and again in 2022 during a prolonged bear market) and has been the best-performing month of the seventh year. times dating back to 2001.
What April’s stock market trends mean for investors
Financial advisors argue that investors should not base their strategies on seasonality and historical trends as they do not necessarily indicate what they are likely to happen in the future. Hence the old adage: time In market beats market times – remains relevant today.
For example, exiting the market to avoid investing in September, historically the worst performing month of the year, may seem logical at first. Yet investors who did so in 2010 missed that month’s 8.8% gain, which was the largest single-month gain that year for the S&P 500.
For buy-and-hold investors, Fed uncertainty is causing thefatiguekeep in mind that stock prices tend to rise over time, as has been the case with the S&P 500 in the 68% of the years it has existed. Notably, a significant portion of these gains occurred in the month of April.
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