April could see equities resume an upward shift


MANY will have been praying for this day for months. The first signs of spring-time heat have appeared with the end of an unusually wintry March. And the effect is already rubbing off on investors. The FTSE began the month of April with a spring in its step, adding over one per cent and bouncing neatly off the 6,400 level. It even had a crack at 6,500.

The long Easter weekend seems to have given investors some much-needed thinking time. They had space to reflect not only on the coldest March on record, but also on what looked like the near unravelling of the Eurozone project. The Cyprus debacle had put a halt to the all too impressive strength we’ve seen in equity markets so far this year.

But looking further ahead, if the FTSE 100 were to repeat its performance in the first quarter of 2012 in the second, we’ll be knocking on the door of an all time record high around 6,950.

So investors will be weighing up the chances of such a record actually being reached. Considering that we’ve already seen the major US indices mark the feat recently, most European indices seem to have fallen behind. But dig a little deeper and they’re not all laggards. The second tier FTSE 250 index smashed its way to a new record back in September 2012, and so far in 2013 it has resembled something of a steep mountain face, as it goes from new record high to new record high (although it caught a cold in March and has recently formed a little plateau).

The month of April has historically been a bullish one for the FTSE 100, with 20 out of the past 29 Aprils returning a gain. This is not quite as good a record as December (25 of the last 29 Decembers have seen a gain in the FTSE), but it’s impressive nonetheless, especially when you consider that the average gain during those positive months has been over four per cent. For the minority of declining Aprils, the average fall was only two per cent, the lowest of them all. But remember that, as any stock broker or fund manager will tell you, “past performance is no guarantee of future results”. So there’s every chance that this April might not conform to what the history books tell us.

This quarter has commenced with a strong move to the upside from equities, and with a full calendar of economic data approaching in the days ahead, there could be further fuel added to the fire, turning those embers into something a little more impressive.

Angus Campbell is head of market analysis at Capital Spreads.

You can follow him on Twitter @AngusCapSpreads

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