There are plenty of reasons for investors to worry about the stock market right now. The month of April means they should remain just that—worries.
There’s no denying it was a tough week for the stock market. The
has dropped 0.7%, the
has fallen 0.5%, and the
has dipped 2%—and at one point on Thursday was on pace for its worst decline since March 2023.
And there’s no ignoring the growing worries that drove this past week’s decline. They include the possibility that the Fed won’t be cutting interest rates anytime soon, something suggested by Friday’s hotter-than-expected jobs report and potentially further confirmed when the consumer price index is released on Wednesday. Geopolitics is also adding to the wall of worry, with the price of WTI crude oil, the U.S. benchmark, rising just over 4% this past week on concerns that tensions between Israel and Iran are heating up.
Add them all up, and you have the possibility that the S&P 500, which rose 10% in the first quarter and trades at a premium valuation, is due for a correction. And yet traders keep buying the dips. At 5214.04, it remains above its 50-day moving average of just over 5080. The fact that it’s still above its recent trend shows that buyers still rule the market.
The market’s momentum is forcing even the less-optimistic market watchers to strike a relatively bullish tone. “I don’t know that there’s anything that says you sell,” says Citigroup strategist Scott Chronert, who has a 5100 target on the S&P 500.
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And there’s a lot to like, once you stop to think about it. The strong payrolls report—the U.S. economy created 303,000 jobs in March, the most since May 2023—likely means the Federal Reserve will put off cutting rates for now, but also suggests that the economy remains strong. And as long as it is growing, U.S. corporate profits will likely continue to grow as well.
“This is what we want—we want to see growth,” says Jay Woods, chief global strategist at Freedom Capital Markets. “Earnings growth continues to increase. Everything is going nicely.”
And that’s par for the course for the month of April. Going back to 1928, the S&P 500 has averaged a 1.4% gain during the fourth month of the year, more than double the average rise of 0.6% for all other months of the year. Odds favor that type of gain, given the market’s advance to start the year—the S&P 500 has averaged a 1.5% gain in years when the index has climbed 10% or more during the first quarter, according to Fairlead Strategies.
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That suggests that a correction will have to wait. “Typically, strength in April gives way to weakness in May, consistent with the adage ‘Sell in May and go away,’” writes Fairlead’s Katie Stockton.
And who knows? Maybe even not then.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
