The S&P 500 Index closed out the last day of Q1:2014 with a gain of 14.72 points, or 0.72%; finishing higher on the Month by 0.69% and higher on the Quarter by 1.30%. Obviously, those month-end and quarter-end statistics were heavily influenced by today’s gains. From a historical perspective, both March:2014 and Q1:2014 were sub-par performances for the index. Between 1950 and 2013, the S&P 500 averaged a 1.22% return in March and a 2.34% return in Q1. Below is a breakdown of average returns by month; April is highlighted.
The month of April, on average, returns 1.50% for the S&P 500 index; third only to November and December. However, it should be noted that April’s return is generally lower when the first quarter’s return is below average. That is, momentum in equities (or lack thereof) continues on from the first quarter into the month of April. The same can be said for Q2. When Q1 is below average, April’s average return drops to 1.33% (from 1.50%) and Q2’s average return drops to 0.81% (from 1.69%). The effects are more dramatic for Q2 as a whole.
To put this in perspective, these are still positive outcomes (on average) with a higher percentage of gains than losses. But how does this fit into your investment outlook? Does it confirm it or reject it? With the S&P 500 slightly higher (and below average) YTD, while spending more than half of its trading days below the December 31st close, we continue to observe a plateauing equity market.