Could things be looking up for the bulls?
Though stocks are on track to post a gain for the month of March (currently up roughly 1.5% by the S&P 500’s measure), markets have certainly been a bit volatile in recent weeks. But for investors dealing with a case of whiplash this month, there’s some potentially good news: April tends to be a strong month for the stock market.
“When I think about April, the first thing I think is, it’s one of the best performing months for the S&P 500, historically speaking,” Lindsey Bell, chief investment strategist at Ally Invest, tells Fortune.
Stephen Suttmeier, technical research strategist at Bank of America, notes that the lead-up into April is often optimistic for the bulls: “Weak late March seasonality could offer an opportunity for the bulls ahead of strong early April seasonality,” he wrote in a Tuesday report, as “the first 10 sessions of April has an average return of 0.88% (1.12% median),” while the last 10 sessions of March has an average return of negative 0.29%. (See BofA’s chart.)
Stocks also tend to perform better at the beginning of the month versus the end (for most months). As Suttmeier points out, “Monthly [S&P 500] seasonality back to 1928 shows that the first 10 sessions of the month tend to be stronger than the last 10 sessions of the month. The first three months of 2021 have followed this seasonal pattern,” he wrote.
For those who favor statistics, April is historically the “second-best month” of the year for stocks, LPL Financial’s Ryan Detrick points out (see LPL’s chart), while the “majority of gains” tends to occur in the first 18 days of the month, Detrick noted on Twitter.
With the S&P 500 down just over 0.3% at the close on Tuesday, “I definitely think this is a buy-the-dip type of opportunity,” says Ally’s Bell, “but also I think it’s a reminder for investors to have some of that defensive exposure.” Bell suggests looking at areas like large tech stocks and consumer staples.
However, not all strategists foresee smooth sailing as we enter April. One danger sign? Rising Treasury yields, which have persistently irked stock investors (the 10-year yield climbed to over 1.7% on Tuesday). “I think that volatility is going to be probably here to stay for the next month or two while investors kind of digest this new environment that we’re working with, which is higher interest rates and potentially higher inflation,” says Bell.
Other areas strategists like Bell are eyeing closely are earnings, what CEOs and CFOs are saying about inflation, inflation data itself, and, of course, more details on President Joe Biden’s massive forthcoming infrastructure package.
“Don’t let rocky waters lead you to jumping ship,” Bell suggests. “Stay the course, but review your portfolio [and] make sure you do have some exposure to those defensive components of the market to make the ride over the next couple months a little bit easier.”
“Longer term,” she adds, “I think the picture still looks really good for 2021.”
