What does that mean for the stock market?

Every year, pranksters try to make their mark with corporate gags.  Elon Musk is notorious for his games, ranging from the self-driving truck accident to his fake ad for a Model W watch and his 2018 tweet about Tesla going bankrupt, causing the stock to fall 7%. On April 1, 2021, Volkswagen stock opened at $32.40 and then rose to a high of $38.46 when the company falsely announced a name change to “VolTswagon”, to publicize its commitment to electric vehicles.  Perhaps the worst example of a market reaction to an April Fools’ Day prank was in 2013 when an Associated Press tweet, created by hackers, informed the public that there had been an attack on the White House, causing the stock market to lose over 150 points in an instant.  Don’t worry though, pranks may create short-lived buzz or speculation, but they typically don’t lead to substantial, lasting impact on stock prices.  Stock markets are highly regulated and influenced by numerous factors such as economic indicators, company performance, geopolitical events, and investor sentiment.

So, what do the real indicators say?  The DJIA is up 5.55% year to date and the S&P 500 rose 10.79% over that same period, despite heavily weighted Apple and Tesla showing marked declines.  With these members of the “Magnificent Seven” lagging, we attribute the strong index growth to the “broadening of the market” that we had discussed in previous commentaries.  This quarter, all S&P 500 sectors, except real estate, logged gains, led by small caps, industrial and financial services stocks.  This is a positive trend for our portfolios that are well balanced and diversified, as opposed to those that overweight momentum stocks.

Corporate earnings have a strong correlation with stock price movement.  Zack’s Investment Research forecasters are still projecting corporate earnings at a healthy 11.1% for 2024 and 13% for 2025, with Aerospace and Consumer Discretionary sectors taking the lead for the near term.

Manufacturing data, often used to identify signs of potential recession, was released only moments ago with an Institute of Supply Management (ISM) manufacturing reading of 50.3, confirming continued expansion.

The feds are signaling a gradual move toward easing and April has historically been a strong month for stock market performance.  For buy and hold investors, over time, stock prices tend to tick upwards, which has been the case with the S&P 500 in 68% of the years it has existed. Notably, a significant amount of those gains have come in the month of April.

Our message to you, there are no April Fools here.

Your team,

Dave, Krista, Joe and Sangam