April is usually the best month for the Dow. Here’s how much it typically goes up and why

Published Fri, Mar 31 202312:28 PM EDTUpdated Fri, Mar 31 20232:06 PM EDT

Not so cruel after all. If history repeats itself, the Dow Jones Industrial Average should have a good April. April has historically been the top month for returns in the 30-stock Dow Industrials, with average gains of 1.9% going all the way back to 1950, according to the Stock Trader's Almanac . That performance can be attributed in part to the end of tax season, optimism heading into second-quarter earnings season and the end of the best six-month period of the year (November-April). By comparison, the Dow has gained around 0.7% in an average month since 1950. April has historically been the second best month for the S & P 500 and fourth best for the Nasdaq Composite (and second best for Russell 1000 and third best for the Russell 3000). "All the indices do well in April, it's just that that's the number one month for the Dow," said Jeffrey Hirsch, editor in chief of the Almanac. "Spring is in the air, as well as the beginning of Q2, and (people are) putting more money to work after sort of restructuring portfolios at the end of Q1." More good news: The Aprils of previous pre-election years have posted an even stronger average performance. The Dow has added 3.9% when averaging every April in the years proceeding an election since 1950. "Our study of the 21-year market performance in April and pre-election years since 1950, shows the month has been nearly perfect with gains steadily building from the first trading day to the last with only the occasional and minor blip along the way," Hirsch and Christopher Mistal said in the Stock Trader's Almanac Newsletter. The Dow has ended 50 of the last 73 Aprils higher. It finished every April from 2006 to 2021 in the green before closing April 2022 down nearly 5%. April is considered to be seldom dangerous, according to the Almanac, with 2022, as well as 2002, 2004 and 2005, the recent exceptions. Lately, the Dow Industrials have exhibited strength following the tax filing deadline, per the Almanac, which falls on April 18 this year. In April 2020, for instance, at the start of the Covid emergency, the blue-chip average had its best performance in more than 80 years with a gain of 11.1%. Easter can also provide a boost, with the index typically gaining on the trading day before Good Friday. But the Monday after Easter has historically been one of the worst post-holiday trading days. Investors can also buy into the 30 stocks before their second-quarter earnings reports if they are optimistic about how the companies will perform. Hirsch said investors may have restructured portfolios at the end of the first quarter and need to put leftover money back into the stock market. Some investors also like to add exposure to stocks in April before anticipating a seasonal decline starting in May. ( "Sell in May, and go away." ) Historically, November through April are the best six months of the year for stocks, while May through October are the worst. Some attribute the seasonal strength to optimism surrounding the December holidays, and indolence in the summer but, for whatever reason, the Dow Industrials have risen an average of 7.3% in the six November through April months versus 0.8% from May to October, going back to 1950, the Stock Trader's Almanac said. With only Friday's session left in the month, the Dow is on pace to finish 1.4% higher. The 127-year-old average slid in the first half of the month as investors grew concerned that Silicon Valley Bank's failure could spread throughout the banking industry, but rallied in the second half of the month. A March advance would mark a reversal from February, when the Dow Industrials lost 4.2% and briefly gave up all of its early 2023 gain.