What are the Best Months to Invest in the Stock Market?

It is common for the industry to claim that timing the market is challenging and in some cases impossible, yet as an expert I am constantly asked to predict where the market is heading. We know the market is influenced by many factors, including economic conditions, geopolitical events, and investor sentiment, all of which are thought to be unpredictable and difficult to anticipate. But is this really the case?

Can you really predict the stock market?

While I agree that events like COVID and wars are difficult to predict, we know that economies move through cycles from prosperity to recession. There is also a well-researched and documented business cycle and each of these cycles have certain phases that effect the price of the stock market. We also know that humans are very predictable because if I followed you around for a week, I could have your coffee ready at your favourite café before you walk in the door.

If we accept that humans are predicable, and that cycles repeat, then it is not unreasonable to assume the stock market would be affected by these factors. That’s why we have months that are generally more bullish than others. So, what are the best months to invest in the stock market?

Data compiled over the last 40 years shows that April has been the best month to invest in the All Ordinaries Index with an average rise of 2.6 per cent. July is also a good month with an average rise of 2.52 per cent, while December comes in third place at an average rise of 1.72 per cent. Does this imply that April is bullish every year? No, but on average it pays to be invested in April.

The worst month to be invested is June which is down on average 0.53 per cent. While October is often considered to be the worst month, it sits in third place behind September as it is down on average around 0.14 per cent.

So, when should you invest? If you invested in November and stayed in the market until April, history shows that these months are generally bullish. Let me stress again, there is no one size fits all and the figures are just averages over the last 40 years. Any month can be bullish or bearish, so it’s wise for investors to consider other factors such as the current market conditions, the fundamentals of a stock and by reviewing how the stock in unfolding on a chart before deciding to invest.

What were the best and worst performing sectors last week?

The best performing sectors included Utilities up 2.05 per cent followed by Healthcare down 0.11 per cent and Consumer Staples down 0.15 per cent. The worst performing sectors included Financials down 3.42 per cent followed by Communication Services down 1.43 per cent and Energy down 1.37 per cent.

The best performing stocks in the ASX top 100 included Evolution Mining up 11.24 per cent followed by Cleanaway Waste Management up 7.85 per cent and AGL Energy up 7.11 per cent. The worst performing stocks included National Australia Bank down 7.84 per cent followed by Amcor down 7.20 per cent and IDP Education down 6.75 per cent.

What's next for the Australian stock market?

The Australian stock market is still largely unfolding as I’ve been expecting, as it fell for seven days into Thursday 27 April before rising on Friday 28 April and on 1 May. Short rebounds like this are not uncommon when the market is falling, which often catches out investors and last week was no exception as the Australian market resumed its fall into my target zone of around 7.330 points.

On 4 May, the All Ordinaries Index fell to 7,336 points with the Index down 1.5 per cent at one point last week. The good news is that last Thursday and Friday the market rebounded to close out the week at 7,413 points or down 1.17 per cent, which is a good sign that may indicate the recent down move is now over.

Again, investors need to remain patient this week until the market confirms it has completed its current move down. For that to occur, we need to see a sustained move up and for the market to preferably close above 7,600 points. As I have previously indicated, there are many opportunities in the market that will reward the patient investor. Remember, buying in hope that a bull market will unfold is unwise and should be avoided at all costs.

 For now good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.