Why April Could Be a Strong Month for the Stock Market

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We just started what’s typically one of the best months of the year for the stock market.

To set the scene, the S&P 500 index — a benchmark commonly used to measure how U.S. stocks are doing overall — is up around 7% for the year as we kick off the second quarter. It’s welcome news for investors, who have recently watched the financial markets grapple with a banking crisis following the collapse of Silicon Valley Bank, as well as continued interest rate hikes from the Federal Reserve.

Past performance is, as always, not a guarantee of how stocks will behave in the future. But looking at seasonality can give us insight into how stocks typically perform at certain times of the year — including the month of April.

How stocks typically perform in April

Bespoke Investment Group strategists looked at April seasonality for the S&P 500 and the Dow Jones Industrial Average. Here’s what they found:

• For the last 50 years, the Dow has averaged a gain of 2.09% during the month, with positive returns 66% of the time.

• When looking at the last 20 years, the Dow has averaged a gain of 2.18% during the month, with positive returns 85% of the time.

• As for the S&P 500, April and the remainder of the year have experienced gains 100% of the time since World War II when the index was down in the prior year and then up in the first quarter. (For background, the S&P 500 was down in 2022 and up last quarter.)

What this means for investors

Financial advisors tend to say that you shouldn’t base your investment strategy on seasonality and historical trends, since they don’t necessarily indicate what exactly is going to happen in the future.

But if the state of financial markets is stressing you out, take solace in the fact that over time, stock prices do tick upwards — and a significant amount of those gains tend to happen in April.

As always, a well-diversified portfolio that aligns with your time horizon, goals and risk tolerance is likely the way to go.

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