To T.S. Eliot, April is the cruelest month. Not to investors, though. For the past two decades, April has been the top performer for the S&P 500, LPL Financial research shows.
In fact, since 1950, the S&P has closed up in April for 15 of the 19 years when January, February, and March were positive months—and such a trifecta is the case in 2019. What’s more, the Dow Jones Industrial Average, which is a narrower index, has been up in April for the past 13 years in a row.
“April may bring showers, but lately it has brought a lot of green as well,” said Ryan Detrick, LPL’s senior market strategist.
This year’s rally, coming after a fourth quarter whipsawed by the trade war and a seemingly relentless upward parade of Federal Reserve rate hikes, suggests the momentum will continue through April. A seeming breakthrough in US-China trade talks and the Fed’s announcement of a pause in its monetary tightening both feed into that narrative. The first three trading days this April have all been positive.
The title for the worst month is September. That, for instance, was when Lehmann Brothers collapsed in 2008, setting off the financial crisis. The second-worst month is June, perhaps because investors tend to back off in summer. Recall the old adage: “Sell in May and go away.”
That adage may explain why April tends to be a superior month in the market: Investors might be lining their portfolios with favorite stocks before the lighter-trading summer months. LPL suggested that April’s warmer weather might also be buoying investors’ moods. As April is tax filing month, putting refunds to work in the market could be another explanation.
Whatever the reason, LPL says its target for the S&P 500 is 3,000 this year. Already, the index is up 14.6% in 2019. To reach the target, it needs to climb a mere 4.4% more.
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