April is a particularly interesting month for investors. A recent academic paper analysed the monthly returns for stock markets of 70 countries over an average period of 24 years; they found that the strongest months were (in descending order) December, January and April. The two countries with the strongest performance in April were, incidentally, Singapore and the UK. And, indeed, until five years ago April was the strongest month in the year for the UK market; although it has now slipped to second place behind December.
On average the stock market rises 1.8% in this month; and the probability of a positive return in the month is 69% based on its recent track record. From 1971 the market rose in April every year for 15 years – a recent record for any month. Although the number of years with negative returns in the month has been increasing lately (as can be seen in the chart).
End of the strong half of the year
Another reason why April is of note for investors is that it marks the end of the strong November-April half of the year. The following month is associated with one of the most famous stock market aphorisms: sell in May and go away; and many investors anticipating this choose to reduce their exposure to equities towards the end of April.
Historically the pound has been strong against the dollar this month, and in sterling terms April has been the best month for the FTSE 100 to out-perform the S&P 500.
In the last twenty years the sectors that have been strong in March have been: Electronic & Electrical Equipment, Industrial Engineering and Personal Goods; while the weak sectors have been: Household Goods, Mining, Mobile Telecommunications and Software & Computer Services.
April is a very quiet moth for company announcement: only five FTSE 100 companies and 11 FTSE 250 companies announce interims or finals this month.
On the economics front, there will be the US Nonfarm payroll report on the 4th, the MPC interest rate announcement on the 10th and the FOMC meetings starts the 29th. Easter falls on the 20th; with the LSE closed on the 18th and 21st. Apart from the days off, is Easter of interest to investors? Well, it could be. Academic studies have shown that markets tend to be strong on the day immediately before a holiday and the day following a holiday – and this effect is strongest around Easter.
Article first appeared in Money Observer
Further articles on April.