Stock market predictions are typically bullish in April. According to The Stock Trader's Almanac, the S&P 500 has climbed every single April since 2006 by an average of 3.1%. Since 1950, it has been the best performing month for the Dow Jones.
This monthly spike is usually attributed to strong Q1 earnings reports hitting Wall Street. Numerous companies will also raise their guidance figures for the full year in April.
This year, things aren't as bullish in the short term. Our stock market predictions today call for continued volatility into Q2.
Here's what to watch in the stock market in April, as well as an update on the long-term outlook for 2015...
Stock Market Predictions: Short-Term Volatility Ahead
The markets were extremely choppy in March.
Through the month's first 11 days, the Dow Jones Industrial Average dropped 3.6%. From there, it gained 2.6% through March 23. Another dip of 2.3% followed through March 27. On Monday, March 30, the DJIA climbed 1.5% in one day alone. The stock market ended March down 1.9% on the month and down 0.24% for Q1.
That volatility will continue in April. And one of the biggest reasons why is the Federal Reserve.
On Friday, March 27, Fed Chair Janet Yellen announced the central bank will raise interest rates for the first time in more than six years. There was no official date set for the rate hike, and Yellen did mention the increase will happen slowly.
Money Morning's Small-Cap Investing Specialist Sid Riggs says when the Fed does begin raising rates "an inevitable short-term rate riot" will occur. Again, investors can expect more volatility in the short-term.
Even before the rate hike was announced, every FOMC meeting was sending the market into a frenzy.
"Traders are trying to digest [Yellen's comments], and you've seen that volatility just explode to the upside, to the downside, now it's going to go side-side for a little while as they really try to figure out all the nuances," Money Morning's Chief Investment Strategist Keith Fitz-Gerald said on March 20.
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Another reason today's stock market predictions see a choppy April is corporate earnings. Low oil prices and a strong U.S. dollar are expected to weigh on Q1 earnings. The Commerce Department estimated last week that after-tax corporate profits dipped 1.6% in Q4 2014.
However, earnings should only lead to a temporary dip in the markets.
"The good news is [earnings] probably don't get a lot worse than they are right now and the comparisons may actually get better," Wells Fargo Fund Management's John Manley said on CNBC. "I think that's important to remember because I think the market tends to look forward in these things."
And while the markets will remain volatile through April, our experts' stock market predictions see the bull run continuing through the rest of the year...continue reading to hear why...
Stock Market Predictions 2015: What's in Store Long Term
While most investors worry about rising interest rates, Riggs' research shows the Fed's actions will actually send the markets higher long-term.
"Six out of the last seven periods during which the Fed was raising rates, the markets actually went up - gaining an average 13.47% during the rising rate periods," Riggs said. "In fact, stocks have gone up in six out of the last six periods when the Fed was in a rising rate environment."
"The only time the S&P 500 didn't increase in value alongside of rising rates was all the way back in the early 1970s, when the Fed Funds Rate increased a whopping 9.21 percentage points, from 3.71% to 12.92%," he continued.
And even though Janet Yellen announced that rates would be raised at a very slow pace, Riggs points out that the Fed only raises rates when it believes the economy is strong enough to absorb the increase.
"Critics say that the economy isn't strong enough to withstand an increase," Riggs said. "I think they're making a mountain out of a molehill. If the economy does stall out when the Fed raises rates, you can bet they'll reverse course, lickity-split, and bring rates right back down again. At which point, we'll be right back (or at least very close) to where we are now - with historic low rates and traders pushing up equity prices in search of return."
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