Will April be best month for share prices in 2023?

As we approach the warm summer months, history tells us the window for positive share price gains is narrowing. Here’s how markets performed last month and what they might do in April.

After a grim 2022, it was a relief to see the recovery that had begun in the autumn continue into 2023. But a two-month winning steak was never going to become three when a new banking crisis broke, hammering London’s broad financials sector.

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March had started much where the previous month had left off, sat within striking distance of 8,000 for the FTSE 100 and just 120 points shy of a record high. But the collapse of Silicon Valley Bank and UBS (SIX:UBSG)’s rescue of Credit Suisse (SIX:CSGN) condemned the UK banking sector, insurers and investment firms to significant losses. The UK bank sector fell 13.6% last month, with Standard Chartered (LSE:STAN) down 21.7%, Barclays (LSE:BARC) 16.5%, Phoenix Group (LSE:PHNX) 13.7% and HSBC (LSE:HSBA) 13.5%. Life insurance fell 10.9%, non-life insurance 10% and investment banking 5.6%.

Ending February at 7,876, the FTSE 100 lost over 500 points in two weeks. The FTSE All-Share went from 4,304 to below 4,000 briefly. By the end of March, the indices had recovered to 7,631 and 4,157 respectively, but still down 3.1% and 3.4% for the month.

The performance table of major global stock markets for March does not reflect well on the UK. None did worse than London’s junior AIM market, down 5.9% last month, while the FTSE 250 index fell 4.9% to 18,928.

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American tech stocks topped the table, with the Nasdaq Composite index up 6.7%. The broader S&P 500 index added 3.5% and the Dow Jones 1.9%. A rally on Friday – the final day of the month and the first quarter of 2023 – did them a huge favour.

Much of the euphoria was down to the latest read on the Federal Reserve’s favourite measure of inflation. Data showed the personal consumption expenditures (PCE) index rose 0.3% month-on-month in in February and 4.6% year-on-year, less than economists had expected. Weaker inflation means less need to keep raising interest rates.

Elsewhere, all the European and most of the main Asian markets ended in positive territory for the month.

Will stocks spring forward in April?

April is, historically, the strongest month of the year for stock markets. The UK’s FTSE All-Share index has fallen just nine times in 39 years.

It fell in 2017, but it rose 6% the year after, then 2.2% in 2019, 5% in 2020 and 4% in 2021. Last April, its winning streak ended, but only by the slimmest of margins – losing 0.06%. The FTSE 100 index did rise though, up 0.384% in April 2022 – the only major stock market in positive territory for that month. By comparison, the Nasdaq fell 13.3% and the S&P 500 8.8%.

The average return for the FTSE All-Share index in April between 1970 and 2017 - the last year the Harriman Stock Market Almanac recorded the data - was 2.6%.

It is also worth noting that April is the final month of the winter season. This six-month period which runs from November is, historically, the best time to own stocks. The following six months is typically less rewarding for investors, referred to as the Sell in May effect. A decline in active investors over the summer holiday months, leaves markets vulnerable to volatility.