More than a third of the month is behind us. At the same time, it is the second quarter of 2021 amid the 3rd wave of the coronavirus. For some countries, such as Poland, it is the strongest wave. On the other hand, many economies around the world are gearing up for rapid opening as vaccines rollout progress. At the same time, looking at the statistics from the last few decades, it turns out that April is a very good month in terms of equity returns. Will history repeat itself this year?
There are several factors which support this scenario. First of all, we are starting a new quarter, and the previous one brought quite a significant correction at the end of last month. Secondly, the start of the new quarter is connected with the publication of financial results, which, given moderate expectations, may cause a positive reaction on the stock exchanges. Reopening of economies is also very positive for individual industries that have been shut for months.This is the case in the United States, where the past two months have been very positive in terms of employment growth.At the very end comes the statistic which shows that April is one of the better months on Wall Street. Looking at the 100, 50, and 20-year returns, one can see that the Dow Jones Industrial Average returned more than 2% on average in almost every case. Looking at the data from the last 20 years, one can see that these returns reached nearly 3% and concern over 80% of cases.
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April is usually a very good month in terms of seasonality. Source: Bespoke Investment Group, Seeking Alpha
Interestingly, the only month that can compete with April in terms of such great statistics is November. Finally, it is worth mentioning about the one-off non-standard event in the form of the release of a huge amount of cash from the Treasury Department reserves. Not only could these actions increase the reserves of the banking system, which could lead to an increase in lending and investment, but could also trigger additional Fed activity, as it was in the previous year. The massive cut in the Treasury's main account for federal spending was "covered up" by a giant asset purchase program launched by the Fed last year.
The huge Treasury Department's cash drawdown has begun. It can be seen that the recent acceleration could have contributed to slower growth of bond yields or a rebound in the stock market.However, this account will be reduced to $ 500 billion by June. Therefore, there will be no shortage of liquidity up to this point. The only question is what will happen next? Source: Fed St. Louis
Therefore, the stock indices may again reach new historical highs. This may not only apply to Wall Street but also to Europe. Nonetheless, there are still risks associated with fears of a financial bubble, although the positive recovery sentiment should prevail.
Stock markets have regained vigor since early April. Nevertheless, technology companies are still lagging behind and the latest Nasdaq records are quite "old". Will the index reach new record highs? The reverse head and shoulders pattern indicates that a potential upward move towards 14,300 pts may be on the cards. Source: xStation5
Positive sentiment and more money available on the market should weaken the dollar and lower bond yields. Theoretically, this is good news for gold, which is at a key point. Will the recent downtrend continue or will the upward correction cause the price to return to the main uptrend seen since 2015? Source: xStation5
