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The stock market has steadily climbed this year, and as April approaches, investors have reason to expect more of the same given that month's track record for strong stock performances.
After gaining 24% last year, the — the benchmark index used to measure how stocks are performing overall — has continued its bullish run in 2024 by posting a nearly 11% gain through the first quarter of 2024.
This is welcome news for investors who have recently seen that index as well as the Dow Jones Industrial Average and the Nasdaq set record highs in the first quarter of the year.
However, overshadowing this is the uncertainty surrounding the Federal Reserve’s decision on when to begin slashing interest rates. According to data from the American Association of Individual Investors, sentiment pulled back from 51.7% bullishness in the first week of March to 43.2% bullishness through last week, demonstrating a more reserved outlook among investors.
But with April arriving, there’s new cause for optimism. Historically, April tends to be a great month for the stock market. And while past performance is never indicative of how stocks will behave going forward, looking at seasonality can provide insight into how stocks typically perform at certain times of the year.
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Is April a good month for the stock market?
According to Reuters, since 1945, April and December are tied as the best-performing months of the year for stocks, with an average return of 1.6%. (September is notoriously the worst, with an average loss of -0.6%.)
During recessions, April’s positive performances can be even more pronounced. In 2008 and 2009 amid the Great Recession, April produced returns of 4.8% and 9.4%, respectively. And in the wake of COVID-19’s arrival, April 2020 saw an enormous 12.7% gain — the 12th best monthly performance for the S&P 500 dating back to 1928.
One theory behind April's positive performance is that investors receive tax refunds that month and inject that money into the market pushing prices higher. No matter what the cause, April is historically such a strong month for stocks that it has only posted losses twice in the past 18 years (in 2012 and again in 2022 during an extended bear market) and was the best performing month in the year seven times dating back to 2001.
What April stock market trends mean for investors
Financial advisors contend that investors shouldn't base their strategies on seasonality and historical trends since they don't necessarily indicate what is likely to happen in the future. That’s why the old adage — time in the market beats timing the market — remains relevant today.
For example, pulling out of the market to avoid investing in September, historically the worst performing month of the year, may seem logical at first. Yet investors that did so in 2010 missed out on that month's 8.8% gain, which was the largest single-month increase that year for the .
For buy-and-hold investors, if the Fed's uncertainty is causing distress, keep in mind that over time stock prices tend to tick upwards, which has been the case with the S&P 500 in 68% of the years it has existed. Notably, a significant amount of those gains have come in the month of April.
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FAQs
One theory behind April's positive performance is that investors receive tax refunds that month and inject that money into the market pushing prices higher.
What month is the stock market the highest? ›
July is historically one of the best-performing months of the year for the stock market. According to Dow Jones Market Data, since 1928, the S&P 500 has posted an average gain of 1.7% this month, finishing in positive territory 60% of the time.
What month is the best month to buy stocks? ›
Historically, April, October, and November have been the best months to buy stocks, while September has shown the worst performance. Knowing when to hold or sell stocks depends on personal strategies, research, and confidence in the stock's potential for growth.
What time does the stock market move the most? ›
Rush hours
9:30–9:40 a.m. Stocks that open higher or lower than they closed typically continue rising or falling for the first five to 10 minutes… 9:40–10:00 a.m. … before reversing course for the next 20 minutes—unless the overnight news was especially significant.
Why there is sudden increase in stock market? ›
Key Takeaways. Stock prices are driven by a variety of factors, but ultimately the price at any given moment is due to the supply and demand at that point in time in the market. Fundamental factors drive stock prices based on a company's earnings and profitability from producing and selling goods and services.
What are the two worst months for the stock market? ›
Here is a summary of the NYSE Composite's best and worst months over the last 20 years (2004-2023)
- Best Months: April, July, October, November, and December.
- Worst Months: January, February, June, August, September.
One of the historical realities of the stock market is that it typically has performed poorest during the month of September. The "Stock Trader's Almanac" reports that, on average, September is the month when the stock market's three leading indexes usually perform the poorest.
Do stocks usually go up in April? ›
According to Reuters, since 1945, April and December are tied as the best-performing months of the year for stocks, with an average return of 1.6%. (September is notoriously the worst, with an average loss of -0.6%.) During recessions, April's positive performances can be even more pronounced.
Why sell in May and go away? ›
The idea behind "sell in May and go away" is that stocks tend to do little during the summer months, picking up again during the fall, as the Halloween effect comes into play.
What is the 3-5-7 rule in trading? ›
The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.
Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.
What is the 11am rule in trading? ›
In simple terms the rule states that: If a trending stock makes a new high after 11:15-11:30am EST, there is a 75% chance of closing within 1% of High of day (HOD). Same applies for downtrend.
What is the 3 day rule in stocks? ›
The 3-Day Rule in stock trading refers to the settlement rule that requires the finalization of a transaction within three business days after the trade date. This rule impacts how payments and orders are processed, requiring traders to have funds or credit in their accounts to cover purchases by the settlement date.
What stock has risen the most ever? ›
Amazon (AMZN)
The Amazon share price had an initial spike after two years but tailed off in 2002. The dot.com boom followed, and Amazon became the world's largest retailer. That's an average stock market return of over 287,000%.
What was the largest drop in the stock market history? ›
The 1987 stock market crash, or Black Monday, is known for being the largest single-day percentage decline in U.S. stock market history. On Oct. 19, the Dow fell 22.6 percent, a shocking drop of 508 points. The crash was somewhat of an isolated incident and didn't have anywhere near the impact that the 1929 crash did.
What is the largest stock market loss in one day? ›
On Monday, Oct. 19, 1987, the Dow Jones Industrial Average plunged almost 22%. It was the biggest single-day decline in stock market history. The remainder of the month wasn't much better: By the start of November 1987, most of the major stock market indexes had lost more than 20% of their value.
What season do stocks go up? ›
... stock markets tend to perform well in January as this is when many investors have fresh capital to invest in shares. ... share prices tend to fall over the summer months as big traders go on holiday and sell high-risk assets.
What day do stocks rise the most? ›
For instance, the “Monday Effect” is a phenomenon wherein stocks tend to experience a dip early in the week, which is often attributed to negative news released over the weekend. Alternatively, there's the “Friday Effect,” where stocks often see a rise on Friday as investors show optimism for the upcoming week.
Do stocks usually go up or down on Friday? ›
Stock prices do not necessarily move based on days. Though, historically, the stocks tend to perform better on Fridays than on the upcoming Mondays. This also suggests that Weekends, the non-trading days, can highly impact the stock performance on Monday.
