Will April Bring Bulls or Bears to the Stock Market?
We all know that April showers bring May flowers. What investors are wondering is if April is going to bring the bulls or the bears to the stock market. As been the case lately, either could make an appearance. We have seen the major indexes show sharp rallies since the market lows in February. This was not unexpected as markets were sharply oversold on nearly every signal. As we have previously discussed, you can only stretch a rubber band so far before it snaps back in the opposite direction just as hard. However, since markets have rallied over 5% off the bottom we are now over bought in most areas for the short term. The good news is that we are now sitting above short-term moving averages. If the market can work off the overbought condition without violating support, the bulls could certainly regain control of the narrative. There is also additional support for a continued bull rally. Higher interest rates will cause bond yields to go down, which will lead to more flows into equities as they are the only alternative to low yields. Historically, the month of April is typically a strong month for stock market return.
This doesn’t mean the market does not still have the potential for challenges ahead. Inflationary pressures can eat away at corporate growth causing earnings to fall. We are seeing the effects of the massive surge of liquidity that was poured in the economy during 2020. While it provided a short-term sugar rush to the economy, we are now seeing inflation surge with no end in sight. As inflation remains unchecked, slower economic growth could lead to continued declines in stocks. The Federal Reserve is raising rates this year, which will cause the cost to borrow money to increase further threatening bottom lines for some companies. Geo-political risk remains elevated and could cause short and intermediate term volatility.
Investors may be scratching their heads asking what side do they fall on? The good news is that you don’t need to pick a side. Investors can take prudent steps while we wait to see what markets will do in both the short and long term. This is a good time to review your asset allocations. If something isn’t working now, you may consider reallocating. Make sure you or your investment manager has clear buy and sell rules for your portfolio. You should have an identifiable exit plan for times when markets or sectors reverse. If you are uncomfortable with current volatility, consider if you are invested appropriately. Taking on more risk than necessary pays off, until one day it doesn’t. This is a good time to perform your own risk assessment. We are happy to speak with you if you have questions about your current investments. No one knows what the future will bring, we can only take educated guesses. However, it seems both the bulls and the bears are going to continue to play tug of war as we head into Spring. As always, if you have questions we would love to help.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.