Stocks Could Limp Into Holiday Weekend, If History Repeats

U.S. stock markets will be closed on Monday, Feb. 19, in honor of Presidents Day. As Schaeffer’s Senior Quantitative Analyst Rocky White recently noted, the S&P 500 Index (SPX) tends to underperform during this holiday-shortened week, averaging a loss and ending higher less than half the time, looking at data since 1971. In fact, digging into returns by weekday, only the Friday after Presidents Day have stocks averaged a gain. But what about the week before the federal holiday?

If recent history is any guide, the S&P could head into the long holiday weekend with a whimper. Since 1971 — the first official Presidents Day — the stock market index has averaged a loss of 0.08% the Friday before the holiday. Further, the SPX has been higher just 40.4% of the time. That’s compared to an average Friday gain of 0.04%, and an average anytime daily return of 0.03%, with win rates above 50%.

Zooming into data since 1998 shows an even steeper average loss for the S&P 500 before Presidents Day. Specifically, while the index’s win rate is slightly higher, at 45%, it’s been down 0.24%, on average, the Friday before the long weekend. Again, that’s compared to average gains on other Fridays and every other day.

Nevertheless, it’s worth noting that the SPX has defied this pre-Presidents Day dip in each of the past four years. The broad-market barometer edged 0.17% higher on the Friday before the 2017 holiday, and rallied an impressive 1.95% on that day in 2016.

In conclusion, stock traders have tended to hit the exits heading into Presidents Day weekend, with the S&P averaging a daily loss the Friday beforehand. Furthermore, the index has averaged a loss during the short holiday week, too. Among the individual stocks that tend to suffer after Presidents Day are Bank of America (BAC) and Citigroup (C), along with Apple supplier Qorvo (QRVO). Retailer Target (TGT), meanwhile, is among the stocks that tend to buck the trend and outperform next week.