By Jordan Chussler MONEY RESEARCH COLLECTIVE
April is historically a strong month for stocks, with an average annual return of 1.6%.
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The stock market has risen steadily this year, and as April approaches, investors have reason to expect more of the same given that month's track record of strong stock performances.
After gaining 24% last year, the S&P 500 โ the benchmark used to measure how stocks are performing overall - it has continued its bull run in 2024 by posting a gain of almost 11% during the first quarter of 2024.
This is Good news for investors who recently We have seen that index, as well as the Dow Jones Industrial Average and the Nasdaq, reach all-time highs in the first quarter of the year.
Overshadowing this, however, is the uncertainty surrounding the Federal Reserve's decision on when to start cutting interest rates. According to data from the American Association of Individual Investors, sentiment fell from 51.7% optimism in the first week of March to 43.2% over the past week, demonstrating a more reserved outlook among investors.
But with the arrival of April, there are new reasons for optimism. Historically, April tends to be a great month for the stock market. And while pThe maximum performance is never indicative how stocks will behave going forward, observing seasonality can provide Information about how stocks typically perform at certain times of the year..
Is April a good month for the stock market?
According ReutersSince 1945, April and December are tied as the best-performing months of the year for stocks, with an average return of 1.6%. (September is notably the worst, with an average loss of -0.6%).
During recessions, April's positive results may 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 after the arrival of COVID-19, April 2020 saw a whopping 12.7% gain, the 12th best monthly performance for the S&P 500 since 1928.
One theory behind April's positive performance is that investors receive tax refunds that month and inject that money into the market by driving up prices. No matter what the cause, April is historically such a strong month for stocks that it has only posted losses twice in the last 18 years (in 2012 and again in 2022 during a prolonged bear market) and was the best-performing month in year seven. times dating back to 2001.
What April Stock Market Trends Mean for Investors
Financial advisors They argue that investors should not base their strategies on seasonality and historical trends, as they do not necessarily indicate what is likely to happen in the future. That's why the old saying: time in market is better than market timingโit's still relevant today.
For example, withdrawing from the market to avoid investing in September, historically the worst performing month of the year, may seem logical at first. However, investors who did so in 2010 missed that month's 8.8% increase, which was the largest monthly increase that year for the S&P 500.
For buy-and-hold investors, if the Fed's uncertainty is causing thestressKeep in mind that over time stock prices tend to go up, as has been the case of the S&P 500 in 68% of the years of its existence. Notably, a significant amount of those gains occurred in the month of April.
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Since joining Money in 2023 as an investment editor, Jordan has specialized in a host of financial topics, ranging from traditional equities (stocks, mutual funds and ETFs), income investment vehicles and alternative assets to savings for retirement and debt-based fixed income securities. and raw materials, with special attention to gold and other precious metals. He prides himself on combining his personal interests and professional experience in finance and education to help readers increase their financial knowledge and make better investment decisions. Jordan has worked in digital publishing for 17 years after graduating from Lynn University as a member of the Kappa Delta Pi International Honor Society and the US Achievement Academy Academic All-American Program. Previously he served as managing editor of Weiss Ratings, where he worked alongside a team of writers, editors and investment analysts to produce financial educational content and daily, weekly and monthly market news alerts. As a contributing writer for BetterInvesting magazine, Jordan covered topics focused on investing fundamentals, technical and fundamental analysis, mutual funds, debt securities, dividend investing, retirement savings strategies, and passive income generation. His bylines can also be seen in Apple News, Money Crashers, The Charlotte Observer, Fort-Worth Star Telegram and a dozen other newspapers.
