The Stock Market in April

April – one of the most exciting months for investors! Five years ago April was the strongest month for the stock market in the year, but it now ranks second behind December. The two months have been switching first and second places for quite a few years now. For the last few years it has been December, but April is not far behind. Interestingly, this characteristic is not unique to the UK market; a study of 70 markets worldwide found that the strongest months for shares were (in descending order) December, January and April.

Monthly returns of FTSE All Share Index - April (1984-2015)

On average the market rises 1.8% in this month; and the probability of a positive return in the month is 71%. Since 2003 the market has only fallen three times in April; although this doesn’t match the earlier performance: from 1971 the market rose in April every year for 15 years – a recent record for any month.

As can be seen in the chart, the strength of the market in April has been fairly constant since 1984 apart from in a few years.

The market often gets off to a strong start in the month – the first trading day of April is the second strongest first trading day of all months in the year. The market then tends to be fairly flat for the middle two weeks and then rising strongly in the final week.

FTSE 100 v S&P 500

This is the strongest month for the FTSE 100 relative to the S&P 500 (in sterling terms), the former out-performs the latter by an average of 1.3 percentage points in April (in 2015 the FTSE 100 out-performed the US index by 5.1 percentage points).

April also often sees strong performances by sterling against the dollar and oil.

The seasonality significance of April is that it the last month in the strong part of the six-month cycle (November-April), that is a feature of the Sell in May Effect (called the Halloween Effect in the US). Therefore investors may be reducing their exposure to equities ahead of May.

Diary

In the diary this month we have US Nonfarm payroll on the 1st, MPC interest rate announcement on the 6th, and the two-day FOMC meeting start on the 26th.

Anniversary-wise, 40 years ago this month in 1976 the first Apple computer, the Apple I, was released. In the same month James Callaghan was elected prime minister and long-end  gilt yields were 15%.


Article first appeared in Money Observer

Further articles on the market in April.

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Strong/weak sectors in April

Strong sectors

The table below lists the sectors that have historically out-performed the market in April.

Sector TIDM
Electronic & Electrical Equipment
Industrial Engineering
Personal Goods

Weak sectors

The following table lists the sectors that have been weak in April.

Sector TIDM
Household Goods
Mining
Mobile Telecommunications
Software & Computer Services

 

 

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The Stock Market in April

April is one of the most interesting months for investors.

Why?

Let’s start with the fact that for the past decades the two stand-out strong months for the market have been April and December – the two have been switching back and forth as the single strongest month. For the last few years it has been December, but April is not far behind. Incidentally, this characteristic is not unique to the UK market; a study of 70 markets worldwide found that the strongest months for shares were (in descending order) December, January and April.

Monthly returns of FTSE All Share Index - April (1984-2014)

The average April

On average the stock market rises 1.8% in this month; and the probability of a positive return in the month is 70%. As can be seen in the accompanying chart, since 2003 the market has only fallen three times in April (although this doesn’t match the earlier performance: from 1971 the market rose in April every year for 15 years – a recent record for any month).

The market often gets off to a strong start in the month – the first trading day of April is the second strongest first trading day of all months in the year. The market then tends to be fairly flat for the middle two weeks and then rising strongly in the final week.

End of the Sell-in-May strong six-month period

The great seasonality significance of April is that it the last month in the strong part of the six-month cycle (November-April); and therefore investors may be reducing their exposure to equities ahead of May.

FTSE 100 v S&P 500

Although over the last few decades the US market has greatly out-performed the UK, the FTSE 100 Index has had a tendency to out-perform the S&P 500 Index in certain months. April is one of those months; in fact, this month is the strongest month for the FTSE 100 relative to the S&P 500 – the former out-performs the latter by an average of 1.2 percentage points in April.

Diary

This month is very quiet 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 2nd, the MPC interest rate announcement on the 9th and the FOMC meetings starts the 28th. Easter occurs early this year falling on the 5th; with the LSE closed on the 3rd and 6th. 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 the market in April.

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Shares that like/dislike April

Shares that like April

The following table lists the five FTSE 350 shares that have the best returns in April over the last ten years. For example, Fenner has an average return of 9.11% for the month of April. All stocks have risen in April for at least eight of the past ten years.

Company TIDM Avg(%)
Fenner 9.1
Royal Dutch Shell 5.4
Aberdeen Asset Management 4.6
Severn Trent 3.9
SABMiller 3.6

Shares that dislike April

The following table lists the four FTSE 350 shares that have the worst returns in April over the last ten years. For example, Balfour Beatty has an average return of -4.4% for the month of April. All four stocks have fallen in at least eight of the past ten years in April.

Company TIDM Avg(%)
Balfour Beatty -4.4
Reed Elsevier -2.3
BAE Systems -1.6
UNITE Group 0.6

An equally-weighted portfolio of the above strong April stocks would have out-performed every year an equally-weighted portfolio of the above weak April stocks by an average of 7.3 percentage points in April for the past ten years.

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Average market behaviour in May

The following chart plots the average performance of the FTSE 100 Index during May since 1984 (more info on this type of chart).

Average month chart - May (2014)As can be seen, historically the market has on average generally risen very gently for the first two weeks of the month and then sold off in the second half to finish down on the month.

April 2014

The following chart shows the average performance of the market in April (1984-2013) and overlays the actual performance in April 2014.

Average month chart - April overlay April 2014 (2014)

In April 2014 the market traded in-line with the historic pattern in the first and final two weeks of the month, but was abnormally weak in the second week.

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Last trading day of April

Tomorow will be the last trading day (LTD) of April.

As explained in the 2014 edition of the Almanac the LTDs of months used to be stronger than average, but in recent years they have been weak.

Since 1984 the index average return on the April LTD has been 0.17%. From 2000 the index average return on this day has been weaker at 0.09%.

The following chart shows the FTSE 100 Index returns for every April LTD since 1984.

Last trading day of April (1984-2013) [2014]

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Average market behaviour in April

The following chart plots the average performance of the FTSE 100 Index during April since 1984 (more info on this type of chart).

FTSE 100 average month chart for April [1984-2013]As can be seen, historically the market has on average generally risen steadily throughout the whole month of April, ending at the high for the month.

March 2014

The following chart shows the average performance of the market in March (1984-2013) and overlays the actual performance in March 2014.

Average month chart - March overlay March 2014 (2014)In March 2014 the big difference from the average March was the weakness in share prices in the first two weeks of the month.

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Strong/weak sectors in April

Strong sectors

The table below lists the sectors that have historically out-performed the market in April.

Sector TIDM
Electronic & Electrical Equipment
Industrial Engineering
Personal Goods

Weak sectors

The following table lists the sectors that have been weak in April.

Sector TIDM
Household Goods
Mining
Mobile Telecommunications
Software & Computer Services

 

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The Stock Market in April

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.

Monthly returns of FTSE All Share Index - April (1982-2013)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.

GBPUSD

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.

Sectors

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.

Diary

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.

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First trading day of April

Tomorrow will be the first trading day (FTD) of April.

As explained in the 2014 edition of the Almanac, the market has a tendency to be strong on the FTD of a month. And this effect has been even more pronounced in recent years.

Since 1984, the FTSE 100 Index has a return average of 0.5% on the April FTD, which makes it the second strongest FTD of the year. The index has risen on the April FTD every year since 2003. Since 2000 the April FTD average return has been even higher at 0.82%.

The following chart shows the returns for every April FTD since 1984.

First trading day of April  (1984-2013) [2014]a

 

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