April: End of the bullish season

April is historically a strong month for equities. It is the best performing month for the Dow Jones Industrial Average, third best performing month for the S&P 500 and fourth best for the Nasdaq Composite Index (see “Vital April Statistics”). It also represents the end of the best six-month period in the market. This is where the “Sell in May and go away” strategy comes from. 

May is not the worst month for major indexes (ranking ninth in the Dow, eighth in the S&P 500 and fifth in the Nasdaq), but it does begin a stretch of weaker performing months. The four months that average negative performance in the Dow stretch over a narrow five-month period from May through September. So, while investors should see April as a strong period to be in the market, their eyes should be on the exit. 

In fact, the corrections that occurred in 2010 and 2011 across all the major indexes began in April. And while the long-term, 20-plus year bull equity market peaked in the summer of 2007, markets rebounded and set a closing high in April before the onset of the credit crisis crash. So, while it can be dangerous to attempt to pick market tops, April is a good month to bet on one.