“ The U.S. stock market is likely to struggle in coming weeks. ”
Contrarians are betting that the U.S. stock market will struggle in the month of April. That’s because of the widespread narrative that April is the best month of the year for the stock market. That premise is either highly misleading or outright wrong, depending on how you view the data. This false narrative is helping to create the “slope of hope” that is the opposite of the “Wall of Worry” that markets like to climb.
As examples of this narrative, consider a recent communication to clients from Jeffrey Hirsch, editor of the Stock Trader’s Almanac. He writes that April is “the #1 performing DJIA month of the year since 1950.” Or take Matthew Carr, editor of First Bar with Matthew Carr website. He analyzed the past three decades and found that April has the highest probability of success of any month. Concluding that April is “routinely the best month of the year for stocks,” Carr refers to the month as “Awesome April.” I don’t mean to pick on Hirsch and Carr, who are not alone among the newsletter editors I monitor in believing the seasonal tendencies favor a strong April. But to one extent or another these newsletter editors focus on just some of the historical data while ignoring other parts. It’s a statistical no-no to not focus on all available data.Average April When you analyze the Dow Jones Industrial Average
DJIA,
+0.68%
as far back in history as the data will allow, April is unexceptional. Since the Dow’s creation in 1896, April’s average return is no different than those of the other 11 months at the 95% confidence level that statisticians use when determining if a pattern is genuine. Furthermore, the stock m …