April has historically been a great month to be invested in the stock market

The US stock market is already off to a spectacular start for 2024. More than Fed rate cuts, the excitement surrounding Artificial Intelligence (AI) has led to optimistic emotions in the markets since the beginning of the year. March ended with monthly gains of 1.17%, 3.10%, and 2.08% for the Nasdaq 100, S&P 500 and Dow 30 indices. The S&P 500 experienced its greatest quarterly performance since 2019 during the first quarter, rising 10.2%. In addition, the Nasdaq Composite gained 9.1% while the Dow gained 5.6%.

In the last 20 years, April has been one of the best months of the year for the stock market in terms of average return and the frequency of higher indices movements.

Cory Mitchell, an analyst with Trading.biz, says “The S&P 500 has moved up in 16 out of the last 20 years in April, that’s 80% of the time. The average gain for the S&P 500 in April over the last 20 years is 2%. The NYSE Composite, a broader measure of stock market performance, has also moved up in April 80% of the time with an average gain of 2%. The Nasdaq 100 has an average gain of 2% in April over the last 20 years but has only moved up in 13 of the last 20 years (65%). Overall, April has historically been a great month to be invested in the stock market.”

Jerome Powell, the chair of the Federal Reserve, meanwhile, has reaffirmed that the Fed is not in a rush to lower interest rates and that the most recent PCE inflation data is consistent with its expectations.

April stands out as one of the best months of the year to be invested in the stock market. Other key months, according to Mitchell include:

July, increasing 75% of the time for an average gain of 2.4%.

November is the top month of the year, historically, with an average gain of 2.5% and moving higher 80% of the time.

January, June, and September are often not great months for the stock market.

“This is called the study of seasonality, and it is backward-looking. It analyzes what has happened in the past, but does not necessarily indicate what will happen this year in a particular month.

In any given year the market could rise or fall. The average gains and losses also obscure the big drops and rallies that are possible in any given month,” adds Mitchell.