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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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, Menzies has an average return of 12.6% for the month of April. Each stock has risen in April in nine of the past ten years.

Company TIDM Avg(%)
Menzies (John) 12.6
Xaar 10.0
Diploma 6.8
Royal Dutch Shell 5.6
Severn Trent 4.1

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 -4.1% for the month of April. All four stocks have fallen in April in at least eight of the past yen years.

Company TIDM Avg(%)
Balfour Beatty -4.1
Centamin -2.8
Shire -0.8
UNITE Group 0.5

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 9.6 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 performance of the FTSE 100 Index during May since 1984

The chart shows that on average the market trades fairly flat for the first two weeks of the month, the third week sees a sell off, with final bounce back in the last few days.


April 2013

The average chart for April was posted a month ago here. The following reproduces that chart and overlays the actual FTSE 100 for April 2013.

Average chart for April 2013 with overlay of the actual FTSE 100 for April 2013

In an average April the market climbs steadily throughout the month. This year, the market started weak, then recovered during the latter half of the month.

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Last trading day of April

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

As explained in the 2013 edition of the Almanac the LTDs of months used to be stronger than average, but in recent years they have been weak. This is quite different from the first trading days of months which strongly out-perform the average for all days, and where the effect has strengthened in recent years.

Since 1984 the market has on average risen 0.19% on the LTD of April, which makes it the 3rd strongest LTD of the 12 months.

Since 2000, however, it has fallen to the 5th strongest month LTD, with an average return of 0.13% on the day.

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

FTSE 100 Index returns for every April LTD since 1984

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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).

Average performance of the FTSE 100 Index during April since 1984

The chart shows that on average the market steadily climbs throughout the whole month ending at the month’s high.


March 2013

The average chart for March was posted a month ago here. The following reproduces that chart and overlays the actual FTSE 100 for March 2013.

Average chart for Mar 2013 with overlay of the actual FTSE 100 for Mar 2013

On average the UK market climbs for the first three weeks of March and then falls back towards the end of the month; this year the market broadly followed the overall pattern, except shifted forward by a week: the market peaked at the end of the second week and then tailed off to the month end.

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First trading day of April

Next Tuesday, 2 April, will be the first trading day (FTD) of April (and therefore also of the second quarter).

As explained in the 2013 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.

The April FTD has been the second strongest month FTD of the year: since 1984 the FTSE 100 Index has increased on average 0.47% on this day.

From 2000 the average return on the day has been even higher at 0.79%; and from 2003 the market has never fallen on this day.

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

Returns for the first trading day of April (1984-2012)

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