After a rough stretch of market volatility, the S&P 500 Index just snapped a quarterly win streak that stretches back to 2015. However, April has a sunnier forecast, according to one strategist.
The S&P 500 ended the quarter with a 1 percent loss, its first negative period since the third quarter of 2015. This loss breaks its longest positive streak for any January through March period in its history: The index has not ended the quarter in the red since 2009.
“Good riddance to the first quarter,” Ryan Detrick, senior market strategist at LPL Financial, told CNBC’s “Trading Nation” this week. “The positive lining is April, historically, has been really strong for stocks.”
In nine of the past 10 years, April has been a positive month for the S&P 500. Going even further back, since 1950 the benchmark has posted an average 1.5 percent gain in April. That average is only eclipsed by the typically bullish months of November and December.
“From a purely seasonality point of view, April is a pretty good month and we think with this little bounce we got right at the end of March, here we think you have a good chance of it continuing,” Detrick said.
The technicals are also supporting gains on the S&P 500 through April, says Detrick.
“Look under the surface,” he said. “We’re back to the 200-day moving average on the S&P. This is fairly normal when you consider the fact that we just had nine consecutive quarters of gains for the S&P 500.”
During the first quarter, monthly declines in February and March dragged the S&P 500 lower. Over the past week, the benchmark index has bumped against its 200-day moving average, though that technical level has provided a degree of support, Detrick said.
“All in all, maybe it’s just the market catching its breath for potentially more strength before the year is over,” he added.
April also kicks off the next catalyst for stock market gains: Earnings. If companies post the level of growth expected, that looks especially positive for the stock market, Detrick predicted.
“We went back to 1991 — 11 times that the S&P 500 earnings were up double digits, the entire year was higher every single time,” he said.
S&P 500 companies are expected to post an 18 percent increase in earnings for fiscal 2018, according to analysts surveyed by FactSet. That would mark its strongest annual earnings growth since 2010.
“If earnings hit these numbers we expect they can as the economy continues to really be on firm footing, we think the fact that we’re flat for the year, down slightly here, this could really be a buying opportunity and we’ll have significant, potentially double-digit, gains before the year is over,” said Detrick.
The first-quarter earnings season unofficially kicks off when the major banks report on April 13.
