We just experienced the stock market’s worst quarter since the COVID-19 pandemic started. But is there finally some relief on the horizon?
While the market does appear to be trending up in the past couple of weeks, it’s impossible to say that it will be smooth sailing from here. The best you can do as you manage your investment portfolio this month is to consider three major themes that will likely affect the market in April.
1. The stock market will calm down a bit in April
The first quarter was kinda crazy, but a much-needed breather could be in the cards for April. Inflation and monetary policy were in focus over the past few months, as the Federal Reserve communicated a plan for aggressive interest rate hikes to combat rising prices across the economy. Geopolitical issues and the Russia-Ukraine war also caused serious volatility in the commodity and stock markets. We also had fourth-quarter earnings season, which revealed strong overall performance paired with a less inspiring outlook for the full year.
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Last quarter, uncertainty hung over a stock market with historically high valuation, which fueled volatility. The CBOE S&P 500 Volatility Index hit 52-week highs in the early part of the month. Many of the past few months’ trading days saw major indexes charge and retreat well over a full percentage point. Enormous swings in market value are starting to seem normal.
The factors that drove high volatility are far from resolved, but the market seems to have digested most of the news. First-quarter earnings season starts back up in the middle of April, but the deluge of corporate results doesn’t really hit until May. The VIX is back down to around 20 right now (after getting as high as 38.9 in early March). That level is higher than it’s been for the past year or so, but it’s fairly average over long-term market history. All signs indicate that investors can look forward to an April stock market that’s not quite as wild as the first quarter.
To be clear — this isn’t a prediction on the direction of the market. The market could move up or down over the next few weeks, but the day-to-day swings should be less intense.
2. Early earning reports will get major attention
By the time first-quarter earnings season starts, nearly a month will have passed since the last major stock market news. Investors are still on edge due to high valuations and economic uncertainty, so there …….