How will the stock market behave before tax day? Data is ‘rough’ at first – iShares Core S&P500 ETF (ARCA:IVV), iShares S&P500 Growth ETF (ARCA:IVW)

There is a lot of interesting information about Tax Day.

According to the Internal Revenue Service (IRS):

• This season, officers responded to more than 1 million calls from taxpayers.
• As of April 6, it had processed over 100 million individual tax returns.
• Tens of millions more applications are expected to be submitted by the April 15 deadline.
• About 19 million taxpayers have until October 15 to apply for an extension.
• More than $200 billion in refunds have already been issued.
• The average return was $3,011, an increase of 4.6% from last April’s average of $2,878.

Although these numbers change from year to year, there is at least one fairly consistent tax day trend. That is, the stock market becomes unstable.

Bankrate, citing data from S&P Global’s Kensho division, said the first few weeks of April are typically “rough.”

Many taxpayers will liquidate stocks or utilize money market funds to meet their immediate cash needs.

Additionally, from 2000 to 2016, the S&P 500 index declined an average of 0.2% in the first two weeks before tax day.

After tax day, things are different. The S&P 500 typically rebounds and ends April about 1.7% higher on average (according to Bankrate, it’s up 75% of the time).

According to Money.com, the S&P 500 index rose an average of 0.83% in the week after the tax deadline from 1998 to 2022 (19 of 25 years). The median weekly increase over the year was 0.31%.

The impact on the overall market in April is minimal. Investors would be wise to stick to a long-term investment strategy and prioritize contributions to tax-advantaged retirement accounts, such as 401k plans and IRAs.

Historically, the S&P 500 has delivered gains of about 10% per year. The goal is to stay invested over the long term, not to time the market.

Financial advisors typically suggest that their clients invest in an S&P 500 index fund (see below) and keep their focus on distant future results rather than short-term fluctuations.

• SPDR S&P 500 ETF (NYSE:SPY)
• iShares Core S&P500 ETF (NYSE:IVV)
• Vanguard S&P 500 ETF (NYSE:VOO)
• iShares S&P 500 Growth ETF (NYSE:IVW)
• Invesco S&P 500 Equal Weight ETF (NYSE:RSP)

President of Yardeni Research Ed Yardeni We predict that the S&P 500 could rise 26% to 6,500 by 2026.

“I think this is a secular bull market,” the economist told CNBC in March. “We still earned $5,400 by the end of the year, which was a pretty bold call a year ago, but now it’s looking pretty conservative. Why?” Isn’t it more than that? ”

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