Active investment management’s weekly magazine for fee-based advisors
After 2017 (and January 2018), which saw extremely low volatility and relatively few trading days where major market indexes gained or lost 1% or more, February and March 2018 went the opposite way. While there were plenty of intraday stock market reversals, most big gaining/losing days seemed to generate momentum into the market close. This year is now trending above the median since 1999 for days with 1%-plus S&P 500 moves. This is illustrated by the bolded red line at the bottom of Figure 1 (2017) versus the bolded blue line (2018) and the black line (median for 1999–2018).

FIGURE 1: CUMULATIVE NUMBER OF DAILY S&P 500 MOVES OF +/-1% IN A YEAR

While increased volatility is making for a bumpy market ride, the good news is that after the Dow Jones Industrial Average and S&P 500 Index put in their first down quarter in just over two years, historical stock market averages for the month of April have a positive trend (Figure 2).

MarketWatch cites data showing “The blue-chip average (Dow Jones) gains 1.9% over April, historically, the best of any month. … It is the third-best month of the year for both the S&P 500 (SPX) and the Russell 2000 index (RUT) of small-capitalization shares. The S&P has historically gained an average of 1.5% over the month, as has the Russell. For the Nasdaq Composite Index (COMP) April stands as the fourth-best month, with an average gain of 1.4%.”

The question moving forward is whether positive trends in corporate earnings and business confidence can overcome stock market concerns over interest-rate, trade, foreign, and budgetary policies.

Bespoke Investment Group recently wrote, “The bottom line is that the market now has more to worry about than it did at the start of the year, and given the extreme upside move it experienced in 2017 and in January, there’s a bit of an unwind occurring.”

FIGURE 2: APRIL HIGHER 9 OF PAST 10 YEARS FOR S&P 500