April Seasonality

Source: http://equity-research.com/april-seasonality/
Posted on Monday, March 30th, 2009 | In Stocks to Watch

Contributed by: Jose Perez (http://equity-research.com) -

Although it’s ending on a very bad note, March has been a relatively good month for equities. Unless we see a decline of 5%+ tomorrow (which is always a possibility in this market), the Dow will close the month in positive territory for the first time since last September.

Fortunately for investors, April has historically been the most positive month for the Dow. Over the last 100 years, the Dow has averaged a gain of 1.27% in April. Over the last 20 years, April has seen the Dow rise an average of 2.39%.And when March has been positive over the last 100 years, April has averaged a gain of 1.98%, versus just 0.25% when March has been negative.

The first quarter is also coming to an end tomorrow, and at the Dow’s current level, it will be the third worst first quarter over the last 100 years. As shown below, all three prior times when the Dow was down 10% or more in the first quarter, the index has averaged outsized gains for the rest of the year. When the index has been down more than 5% in the first quarter, it has averaged a gain of 8.04% for the rest of the year.

Interestingly, the Dow has historically averaged a bigger gain in the last three quarters of the year when the first quarter has been down (5.71%) versus when it has been up (5.42%). Even though the first quarter has been one of the worst in history, history suggests that maybe we shouldn’t be too negative on the outlook for the rest of the year.