The stock market is poised for a solid rally in April as bullish seasonality counters bearish investor sentiment, BofA says

• The stock market is poised for a solid rally in April, according to Bank of America.
• The bank points to strong seasonality in April, which happens to be the second-best month of the year for stocks. 
• That strong seasonality should be able to counter the bearish sentiment of investors, BofA said.

The stock market is poised for a "solid rally" in April as strong historical market trends counters bearish investor sentiment, Bank of America said in a Monday note.

The bank highlighted the strong seasonality for stocks in the month of April, which is the second best month of the year in terms of market performance. Since 1928, April has generated positive market returns 66% of the time, with an average return of 1.41%.

Those gains could be even stronger this time around following a period of weak performance in the market, according to the bank. November through April is the best six-month period for stock market returns since 1928, but from November 2021 through March 2022, the S&P 500 fell 1.63%.

"Although this strong seasonality did not show up in 2022, April could see a solid rally. When November-March is below average, April's average return moves up to 1.76%. April's historical average return was even higher at 2.25% when the November through March return was negative," BofA explained.

That strong seasonality would counter the bearish investor sentiment that has overtaken the market in recent weeks, due to an inverted yield curve, the Fed's first interest rate hike since late 2018, and rising inflation. 

And if April proves to be a solid month of returns this year, those gains could spillover into May and June, as a strong second quarter often follows a weak first quarter, BofA highlighted. The only roadblock to a strong second quarter for stocks is the fact that it's a midterm election year.

Historically, midterm election years put investors on edge as they weigh the potential power shifts in Congress and the implications for business and the markets.

"Negative average returns in May, June, August and September suggest that the midterm year still poses a 2022 challenge for the S&P 500," BofA said. But that period of weakness if often replaced by a period of strength in the last three months of the year during a midterm election. 

So far, the S&P 500 is off to a strong start in April, up 1.2% since March 31.