Bank of America: These 2 charts suggest the stock market could soar over the next 2 months
- History suggests the stock market will be strong in March and April, according to Bank of America Merrill Lynch's technical analysis team.
- The firm provides two charts that uphold its expectation for equity gains over the next two months.
The next two months should treat the stock market well - at least if history is any indication.
The technical analysis team at Bank of America Merrill Lynch has looked at past monthly performance for the benchmark S&P 500, dating all the way back to 1928, and concluded that March and April provide a sweet spot of sorts for equity investors.
The first chart below shows the S&P 500 has, on average, risen 0.62% in March and 1.22% in April. Those are vast improvements upon past Februarys, which have lost money, while also featuring a higher percentage likelihood of the benchmark being positive for the month (as indicated by the yellow line).
"Seasonality tends to improve in March and April," Stephen Suttmeier, a technical research analyst at BAML, wrote in a client note. "The next month with more challenging seasonality is May."
The second chart address six-month stretches for the S&P 500, all with different monthly ending points. BAML points out that we're entering the final two months of the November-to-April span, which has historically been the strongest period of the 12 being compared.
That's true both on a return basis - the S&P 500 has gained 5.39% on average over the period - and based on percentage likelihood of a positive month (70.8%).
Judging by Wall Street year-end forecasts, BAML's technicals-driven forecast for two months of gains doesn't seem too outlandish. The 24 strategists surveyed by Bloomberg are expecting a 10% S&P 500 gain from current levels by the end of 2018.
