Investors need to make the most of the spring month.
April is a good month for investors. In fact, since 1970 it has been the best month for UK equities.
Since that year, the FTSE All-Share index has fallen in April in only nine years. The average return for the index in the month since 1970 is 2.6%, which is significantly higher than the average returns for the following two strongest months (December and January), although it must be said that the volatility of returns is also relatively high in April.
In recent years, the market’s performance in April has been less stellar and December has replaced it as the strongest month. Since 2000, the average return of the FTSE All-Share index in April has been 2.0%, with positive month returns seen in 13 of the last 19 years. Returns have been modest in the last 10 years, until last year, when the index soared 6%. So perhaps April is getting its mojo back.
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, rising strongly in the final week.
Investors need to make the most of April. After this month the market enters a six-month period when equities have tended to tread water (the ‘Sell in May’ effect). Equities have outperformed over the winter period (November-April) relative to the summer period (May-October) in 17 of the last 20 years.
This is also the strongest month for the FTSE 100 index relative to the S&P 500 (sterling terms); the former outperforms the latter by an average of 1.3% in April.
It’s Easter on 21 April, so the London Stock Exchange will be closed on Friday 19th and Monday 22nd. A famous anomaly in stockmarkets is that prices tend to be strong the day preceding and the day following a holiday. This effect is strongest in the year around the Easter holiday.