April has been a disappointing month for seasonal trading, with the S&P 500 down 3.0% and breaking a five-month winning streak. This is particularly concerning as April is traditionally a strong month for the stock market, with the Dow Industrials averaging a gain of 1.9% since 1950 and the S&P 500 averaging a gain of 1.5%. This has raised concerns as the market enters a seasonally weak six-month period from May to October. The average yearly gain for the Dow Industrials since 1950 has been 0.8% from the beginning of May to the end of October, but 7.3% measured from November through April. This has led some to suggest that selling now and staying out of the market until November would produce superior returns. However, experts caution against market timing, noting that even in weaker periods, the S&P 500 has historically posted positive gains. Nicholas Colas from DataTrek recently took a look at the best six months strategy from a shorter time period (1980 to 2024). He found that the S&P 500 has been notably weaker in the five months from June to October than the rest of the year. However, even in the weakest five months, the S&P was still up almost 2%. Colas concluded that “not being invested during this timeframe therefore leaves money on the table, and every marginal percentage point of performance helps, of course.” Jeff Hirsch from the Stock Trader’s Almanac also noted that the market has a “tendency to be weaker in April and May after big Q1 gains in election years,” but also noted that the last seven months of the year tend to be up. The bottom line: market timing is always a tricky affair. Most of the time, it’s not worth trying to do it. Many of these timing maxims could be trumped by an even better one: “It’s time in the market that matters, not market timing.”
April’s S&P 500 Slump Breaks Seasonal Gains, but Market Timing Remains a Tricky Affair
