The Oslo Stock Exchange has almost only expired in April Plus in the last 26 years. Now the stock expert sees a strong earnings season could make the phenomenon strike again.
A strong first quarter is over on the Oslo Stock Exchange, and investors are now looking forward to the rest of April – the month in which the benchmark index has historically delivered the strongest return.
Nordea’s chief investment officer Robert Ness has done the math for E24 and shows that the April benchmark index has generated an average monthly return of 3.5 percent over the past 26 years.
In 21 of the past 26 years, the headline index has risen in April as a whole.
It was by far the best month since 1996, Ness explains.
He asserts that there is no simple explanation for the stock market phenomenon.
– Not like the weather as we know that June will be much warmer than January in Norway, and that on a yearly basis it will always rain more in Bergen than in Oslo. Ness adds that if investors think that April will be better than other months, such as May, they can only buy futures in the markets in April and make a shameless amount of money.
Oil prices are their own worst enemy
More optimism in numbers
The stock expert believes that a possible explanation is that Oslo Securities companies usually report for the first quarter of the year in April – something that a number of investors and other market participants are watching closely.
It is plausible that there is more optimism in those numbers. If there are parts of the work that aren’t going quite as planned, you may have to wait a bit to tell. Because if it improves during the spring, there’s nothing to be said, writes Ness.
Ness also noted that some people interpret April’s optimism by saying that many companies are paying dividends to shareholders at the time.
– and that the markets do not quite succeed in relying on it, that the stock markets go up a lot. But when I check dividend payments in the big markets, April isn’t the hottest month for dividends, he comments.
The main index’s best return in April over the past 26 years – that is, when the Oslo Stock Exchange received new indices – is 13 percent, while its weakest is minus five percent.
By comparison, the main index for September had an average return of minus 1.3 percent in the same period, with the strongest and weakest returns of 8.2 percent and negative 25.2 percent, respectively.
Heading into the best profit year ever
Næss is looking forward to a strong earnings season on the commodity-heavy Oslo Stock Exchange.
The number of raw materials such as oil and gas rose sharply this year, including in the wake of the Ukraine war.
It looks like the upcoming earnings season is good and Norwegian companies are heading towards their best earnings ever. Earnings actually appear to be 26 percent higher than last year. Then he says it’s not so bad that the benchmark is up 5.7 percent so far this year.
So we can test that April will be a good month again. What is exciting, however, is whether people around the world can live as they once did despite the rising prices of raw materials. And the investment manager adds that if they cut consumption, it could again have a ripple effect on commodity prices, so things won’t go well for Norway.
On the first trading day of April on Friday, the main index finished 0.67 percent higher.
The Russian war is changing energy policy in Europe
Anders Johansen, chief strategist at Danske Bank Anders, says the first full week in April will be uneventful, with a few key figures and a few major incidents.
“Next week, it is expected that things will start to open up again after the pandemic in the United States,” he says.
On Friday, Russia will present new inflation figures. This is something economists don’t usually follow, says the chief strategist.
It might be interesting to see what happens, even if we can’t necessarily trust that number.
On Thursday, a group of US Federal Reserve members will speak. The minutes of the central bank’s March meeting are also expected to be published this week.
You may hear more about the extremely high market expectations of higher US key interest rates.
Danske Bank now believes the Fed will raise the key rate by 0.5 percent in the next three rate meetings, and then 0.25 percent in the next three to end the year at 2.5 percent, Johansen says.
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