NEW YORK: Equity bulls expecting a bumpy ride for US equities to be over soon have a historically favourable seasonal pattern on their side.
April tends to be a strong month for stocks, with the S&P 500 Index sporting an average gain of 1.5% since 1990, trailing only November’s 2.2% advance, data compiled by Bloomberg showed.
One popular theory pins the seasonal dynamic on retail investors – a persistent source of support for US stocks – returning to the market after the mid-month tax deadline.
“A lot of it revolves around the liquidity needs of retail heading into Tax Day,” said Dave Lutz, equity sales trader and macro strategist at Jonestrading Institutional Services LLC.
“Everybody is probably hunkering down and holding any dry powder until they are through their taxes, and historically afterwards, people get refunds and reinvest.”
The S&P 500 has posted an average gain of 0.83% between April 15, the deadline for Americans to file their taxes, and the end of the month, according to data compiled by Barclays Plc going back to 2006.
And this year, tax-refund cheques hitting consumers’ wallets are up 10% from the same time in 2025, according to the Internal Revenue Service.
The dynamic may offer a tailwind for a market trying to regain its footing after a bout of geopolitical and policy anxiety pushed technology megacaps into a correction and the S&P 500 down more than 5% from its peak.
The 500-member index gained 0.4% on Monday, while the Nasdaq 100 Index advanced 0.6%.
Under the hood, buying momentum in the second half of April has been particularly pronounced in the Nasdaq Composite Index and small-cap Russell 2000 Index, according to data from the Stock Trader’s Almanac going back to 1994.
However, Christopher Mistal, director of research at the firm, strikes a note of caution: pinning all of that on the tax season alone may be premature since investors are likely adjusting positions ahead of earnings season at around the same time.
“Nonetheless, the combination of the events, and the impact of Easter in years like now, do appear to shift most of April’s strength into the second half,” Mistal said.
Mom-and-pop investors are not the only group expected to flip back to buying in April.
The trading desk at Goldman Sachs Group Inc said systematic investors – comprised of commodity trading advisers and volatility – targeting strategies, could deploy roughly US$20bil in US equities as a wave of selling by the cohort dries up.
The month’s historic strength may provide solace to investors looking for a bottom following a selloff that dragged the S&P 500 down as much as 9% from its January record as war in Iran spurred the largest oil spike in history.
Although a rebound has started to take shape, the market remains at the helm of an unpredictable war.
Much of the expected boost is indeed poised for later in the month.
The first half of April is on average one of the softest windows for retail buying, while the final two weeks have tended to see a modest pickup in activity into the remainder of the month and quarter, per data from Vanda Research going back to 2013.
“With most investors having already de-risked sharply since the start of the Iran conflict, the bar for any further material selling in the next few weeks looks high,” said Viraj Patel, global macro strategist at Vanda Research.
“Instead, once we get through the retail tax day effects, the positioning and flow set up for any equity relief rally looks attractive from the second half of April onwards,” he added.
“And any de-escalation or end game in the Iran conflict would help bring buyers back to the market.” — Bloomberg
