Seasonal Analysis: Will April’s Seasonal Tailwinds Offset Potential Volatility Headwinds?

Looking back over the past 20 years, March and April historically have been seasonally strong months to own U.S. stocks. However, last month’s increased volatility in the equity markets created headwinds that resulted in lower than average seasonal performance for the S&P 500 Index. Will this be a repeat story for April? History suggests no, and based on seasonal statistics, equities could move higher in April even if increased volatility persists, which may be beneficial to certain overall portfolio strategies.

That’s right; our seasonal analysis indicates April may be bullish for the S&P 500, which has been positive 75% of the time for the period reviewed However, seasonal analysis also helped us identify specific sectors and industries that could be poised to outperform the index in April—a month when the index has on average been higher by 1.8%.

When reviewing the data below, it is important to remember that non-seasonal factors still influence performance and should not be ignored.

A variety of sectors have on average tended to exhibit relative strength during the month, with energy and consumer discretionary outperforming the index with the most consistency (65% of the time). However, suitable investors interested in a more targeted strategy may consider industry-level investments like the media group, which has posted higher average relative returns than the energy sector with a greater frequency of outperformance relative to the index; or the automobiles and components industry, which has significantly outperformed the index in April over the past 20 years, if with less frequency.

As we begin April with volatility persisting in the markets, incorporating seasonal statistics as part of your portfolio management plan may be one way to help navigate any potential disruptions within the equity markets.

 

IMPORTANT DISCLOSURES

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing in stock includes numerous specific risks including the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

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