April tends to be one of the best months of the year for equities — and with a gain of 1.5% so far this year, 2015 is living up to its reputation.
Bespoke Investment Group analysmarts note that what is somewhat unique about this year, though, is the fact that we have seen this strength in the early part of the month. The last time the S&P 500 was this strong in the first 10 days of the month was in 2010. Based on the last 10 years of trading, as we approach mid-month, the outlook for equities suggests further strength, the analysts argue.
During the last 10 years, the S&P 500 has seen a median gain of 2.01% from the close on April 13 through April 27, with positive returns 60% of the time, including a 2.6% gain last year. From a sector perspective, performance has also been positive with seven out of 10 sectors seeing median gains of more than 1%, and three seeing gains of more than 2%, the Bespoke data points show.
Leading the way higher have been equities in the Industrials sector, which has seen a median gain of nearly 3% and positive returns eight out of ten times. Besides Industrials, three other sectors (Consumer Discretionary, Technology, and Materials) have also risen 80% of the time, the Bespoke data shows. Sectors that have underperformed the most are Health Care (0.32%), Telecom Services (0.45%), and Consumer Discretionary, according to the report.
Digging down into the details, it may be useful to review the 10-year data to look at the stocks that tend to do the best over the coming two weeks. The most interesting to me are oilfield services giants Baker Hughes (BHI) and Schlumberger (SLB), which have averaged gains of 10.2% and 6.1%, as well as home builders DH Horton (DHI) and Pulte Homes (PHM), which average 7.5% and 6.1%.
History is not destiny, but seasonal tendencies can be surprisingly strong. I expect to use this information, along with other research, to recommend BHI or SLB soon. But right now, I want to clue you in on one of the equities I do have a position in my Trader’s Advantage service.
Zoetis (ZTS) develops and sells animal-health medicines and vaccines, primarily for livestock and companion animals. Shares have been moving higher the past year and right now are in the same sort of flat to slightly higher pattern that tends to lead to a breakout.
Buy ZTS at $46.90 limit. Set up to sell all at the final target of $50.60. Set a stop at $44.95, after 11 a.m. ET only.
InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.