Key insights
- The S&P 500 gained 10.5% in April, a rare event occurring only 13 times in the last 50 years. Historically, such gains suggest potential short-term pauses but long-term momentum. The tech sector significantly outperformed. Limited sample size warrants caution, but the analysis points towards continued, albeit potentially volatile, market strength.
U.S. stocks just wrapped up a fantastic April. The State Street Technology Select Sector SPDR ETF (XLK +2.20%) finished the month up 20%, only the second time the fund has posted that kind of monthly return since its inception in late 1998 (it gained 24% in October 2002).
The S&P 500 (^GSPC +0.77%) didn't do quite as well, but it gained 10.5% itself thanks to that big rally in tech. If there's a downside to this, it's that the tech sector was the only sector to outperform the S&P 500 in April. It's still good news for the majority of investors, even if it wasn't quite so good for those who had been repositioning themselves for the market rotation earlier this year.
A monthly gain of 10% or more for the S&P 500 isn't unprecedented, but it's rare. Over the past 50 years, April 2026 is only the 13th occasion on which this has occurred.
The natural inclination might be to assume that, after such a strong rally, the index is due for a pause or even a decline. History suggests that this might be true in the short term. Over the long term, however, it might be more of a momentum signal.
This is the first time the S&P 500 has gained at least 10% in a single month since the COVID-19 pandemic, when news of working vaccines emerged in November 2020. Before that, you'd have to go back to 2011. Prior to that? 1991.
Given its rarity, investors don't want to put too much credence in it because it's such a small sample size. But there are some potentially interesting findings regarding market performance if we look at past occurrences.
First, it's worth noting that prior to April, a double-digit gain in the S&P 500 has happened only three times in the past 30 years. Most occurred during the 1970s and 1980s, when the market environment and economy were very different. We should probably take all results with a grain of salt.
That said, the results, taken as a whole, suggest a couple of things.
Here are some of my observations regarding these results:
Overall, this suggests not only that there's still potential for positive performance going forward, but also for significantly above-average returns.
A 10% monthly return could signal the start of a longer-term positive momentum cycle for stocks, rather than an indication that stocks have become overbought.