April has been one of the best months of the year for the stock market over the last 20 years, both in terms of how often indices move higher and the average return.
Cory Mitchell, an analyst with Trading.biz, said, “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.”
The following StockCharts graphic shows how the SPDR S&P 500 ETF (SPY) has performed in each month throughout the year. The number at the top of the column is the percentage of how many times the price has closed higher than it opened for the month. The number at the bottom is the average percentage gain or loss for the month over the last 20 years.
April stands out as one of the best months of the year to be invested in the stock market. Other key months 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.
Seasonality is generally not relied on exclusively. It is not a strategy, which includes entry rules, exit rules, risk management, position sizing, and how positions are managed if market conditions change. Risk must always be managed for all trading positions because a move higher in April is not guaranteed.
Coming into April, the S&P 500, Nasdaq 100, and NYSE Composite indices are in a bull market. They have been moving higher since November 2023. The Nasdaq has stalled in March, moving sideways, but hasn’t provided any major bearish signals yet. Price action is still strong heading into April.
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